3 Items the Shortsighted Media Doesn't Understand About Tesla Motors Inc. Stock

Are you following Tesla's story? The media is clueless about these three Tesla topics.

Jul 12, 2014 at 2:20PM

A number of recent reports on electric-car maker Tesla Motors (NASDAQ:TSLA) serve as excellent examples of key differences between the shortsighted media and the long-term minded buy-and-hold investors. On three particular Tesla topics that often make headlines, the media appears to be somewhat clueless.

Tesla Model S Hq Twitter Feed

Model S outside of the entrance to Tesla's headquarters in Palo Alto, Calif. Image source: Tesla Motors

Battery fires
Over the 4th of July weekend, a stolen Tesla ended a run from the police in an accident, reportedly driving 100 miles an hour. The Model S was split in two and the battery went into flames. Similar to the market reaction to previous fires, the stock sold off meaningfully on Monday, closing with a 3% loss (though it's worth noting that the stock is up about 49%, year to date).

There's no merit for any market reaction to an accident like this, period. In March, Tesla CEO Elon Musk said the "odds of a fire in a Model S, at roughly 1 in 8,000 vehicles, are five times lower than those of an average gasoline car and, when a fire does occur, the actual combustion potential is comparatively small." Even with the most recent fire, this statistic has likely improved since then.

For long-term investors, the overall safety, and lack of fires or explosions for the Model S is evidence that electric cars can offer a greater safety profile than their internal combustion engine peers.

Quarterly nonsense
Going into every Tesla quarterly earnings report, there's discussion about how the company may miss guidance. But the credibility of such speculation amounts to nil.

While it's always possible that Tesla could miss guidance, it is unlikely. Further, Tesla's deliveries in the short-term play almost zero role in the company's potential to become a mass-market player.

Tesla Fremont Factory

Tesla's Fremont, Calif., factory. Image source: Tesla Motors

How is missed guidance unlikely? First, management has considerable vision into the next quarter when it reports guidance. This gives Tesla's quarterly delivery forecasts great credibility. When Tesla reported first-quarter results, for instance, it was just a week away from the halfway point of Q2. Second, as a supply limited company, Tesla said it had already sold out of second-quarter production. Finally, Tesla has visibility into "the growing pipeline of in-transit cars to Asia and Europe."

Over the long haul, however, quarterly deliveries are just a rounding error compared to what Tesla wants to accomplish with the help of its Model X and a more affordable electric car. Instead of focusing on quarterly deliveries, long-term investors know that the most important story for Tesla is its plans related to its game-changing pipeline of vehicles.

But even if Tesla missed quarterly guidance, it would simply signal a short-term blip in production, having nothing to do with demand. The media has repeatedly confused Tesla's deliveries with demand. Thinking this way can lead to the false conclusion that demand in North America has peaked, simply because North American deliveries didn't grow sequentially in recent quarters.

Tesla Model S In Wales

Model S. Image source: Tesla Motors

But it's Tesla's orders that speak about demand for this supply limited company -- not deliveries. While Tesla doesn't always speak up regarding orders, it did say in the first quarter letter to shareholders that there was "a significant sequential increase in worldwide net orders for the Model S." Specifically for North America? Net orders grew sequentially by more than 10%, Tesla said.

Those following Tesla stock should stay focused on net orders, the Gigafactory that will build batteries for Tesla's planned affordable car, and Tesla's vehicle pipeline. Model S battery fires, this quarter's deliveries, and quarterly demand speculation offer no insight into the big picture for the stock. And for a stock like Tesla with wild growth priced into the stock, it's the big picture that matters.

How to invest in a new, revolutionary vehicle technology
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to invest in this megatrend. Click here to access our exclusive report on this stock.

Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers