Some stocks represent companies whose primary stock in trade is wild rides. Disney (NYSE: DIS), Cedar Fair L.P (NYSE: FUN), Six Flags Entertainment (NYSE: SIX) and plenty more from there all qualify. Sometimes, however, a stock itself can be a wild ride, and that's definitely been the case for Tesla (NASDAQ: TSLA). The company recently added a few more curves to its latest wild ride as premarket trading brought the stock back up over the $800 level, even if only briefly.
Tesla's Surprise Pop-Up Gives Another Taste of Broken Records
Tesla stock seems to gain ground almost as quickly as it loses it in several cases; the stock hit the $900 level just last week. Though it didn't stick around long, it did recover pretty quickly, even if it's given some ground again. The stock is currently trading at $789.18 as of this writing, so it's been quite a ride ever since.
Reports suggest that one of the biggest reasons for the gains is coronavirus-related, as the local government in Shanghai announced plans to help the company—and those like it—“resume production as soon as possible.” How far that will go in the potential face of word from Beijing, not to mention reality itself, is unclear, but it did seem to throw Tesla bulls a little extra hope.
Right now, the biggest combination of factors driving Tesla's wild upward ride seem to be an issue of short squeezes gone awry and rampant speculation. Just last week, some comparisons were made between Tesla and the popular cryptocurrency Bitcoin, as both experienced a similar sudden upward trajectory for reasons that basically amounted to speculation.
Potholes Ahead for Tesla?
Yet even as the stock climbs to substantial new heights, there are plenty who consider the road ahead extremely rough for Tesla ahead. The market consensus is increasingly turning against the company, with FactSet analysts now almost half-bearish on Tesla's future. Not even one in five—just 19%—can offer a positive outlook.
Some have been seen to wonder if the strange behavior exhibited in Tesla stock isn't a mirror for an upcoming sell-off in the market, which has been a specter at the feast for the last few months now. Comparisons have even been drawn between Tesla and Bitcoin, especially after the sudden upward ramping in price. That huge upswing may actually prove a weak point for Tesla going forward as profit-taking could kick in.
Speculations aside, things don't exactly look good for Tesla right now. Already, Tao Lin—the Chinese vice president of Tesla operations—has announced delays in car deliveries thanks to the coronavirus outbreak. That seems to only apply to February deliveries right now, and Lin announced plans to get the production line caught up just as soon as the viral outbreak improves.
The problem with that, of course, is that no one knows when that will be. Plans to return to work following the extended Lunar New Year holiday seem to be fizzling, if only partially, amid travel restrictions and outright lockdowns in major cities.
The Pivotal Chinese Gigafactory Focal Point
Right now, much of the focus for Tesla is on China. We've known for some time now that activity in the Chinese market, both production and sales, were pivotal to Tesla's plans to join the S&P 500. Tesla needed two more consecutive quarters of growth to hit that marker, and with both the factory and the market hobbled by the coronavirus, a third profitable quarter—let alone a fourth—isn't exactly looking like a sure thing.
Granted, Tesla has other arrows in its quiver. It's got a European market and a US market, not to mention a rapidly-improving battery technology that could produce a whole new market of its own thanks to a power grid that's not exactly up to date. Most of these, however, have already demonstrated their impact already; the battery concept is still not exactly ready for prime time.
If China can get its factories fired back up and running—which would include Tesla's—then this may all be just a small hiccup on the way to getting Tesla back in the thick of it and sufficiently profitable to make the S&P 500 run a reality. If China continues to call in sick to the world economy, though, the short-sellers may finally get one over on Tesla. Tesla has beaten short sellers before, but nothing goes up forever; eventually, the short sellers win, and a post-coronavirus China looks like it might be the breaking point.