For most of us, $100,000 electric cars are either out of reach or just not practical in their current form. Despite the generally small addressable market for the Tesla Model S (the company is expected to deliver only 35,000 cars in 2014), the company, its founder/ceo, their product and of course the stock continue to garner a ton of investor and media attention. CEO Elon Musk has done his part of late to keep the buzz going, either commenting on the stock’s price, or teasing upcoming announcements. I think it is important to note that as brilliant as many believe Musk to be, he certainly lacks the sort of panache of a Steve Jobs, who he is often compared too. While Musk has bet his fortune on creating a car that he thinks the world should be driving, Jobs focused on creating products that he also believed would change the world, but that were in the reach of billions of people worldwide. Point here is that when Musk teases a new product, it is important to note that any new products will be geared towards tens of thousands of people, not the tens of millions that a company like Apple’s will.
Why is this important? Well as far as Tesla’s financials are concerned, it is not, it’s just noise. As far as how investors view announcements about new products, I assume that after last night’s announcement of a new 4 wheel drive model, they will be a tad less willing to bid up shares in the week prior unless they have a bit more information.
For almost three decades, Steve Jobs created a sort of buzz about products and categories through his media events that NO other company the world over has been able to replicate. Of late, every consumer electronics company tries to unveil their latest gizmo to an interested crowd, but it is just Apple who is able to do so in a manner that turns the media in the audience into fans. Samsung, Amazon, Microsoft and Blackberry have all suffered some severe post-product launch hangovers that must have left the c-level suite asking many questions about their marketing teams. I would add that even Apple post-Jobs has its own share of issues with such events. Tim Cook lacks presence and confidence in his delivery of such superlatives like extraordinary, magical and revolutionary.
So why has Tesla gone down this route? I suspect that it’s fun for Musk. And why shouldn’t it be; he has committed his life to this endeavor, and the cards are nothing short of stacked against him.
On Monday, we previewed what sort of weekly movement the options market was implying for TSLA out of the event:
The weekly straddle (the put and the call of the same strike of the same expiration) in TSLA is now priced at around 4.5% (currently it costs about $11.25 for the Oct10th $262.50 straddle). That actually looks somewhat cheap considering that TSLA has bounced more than $20 in just the past 3 trading sessions, in anticipation of the news, rather than any actual news.
The stock is down 5% this morning, and if this weakness holds there are two take-aways. Investors will be less likely to bid up shares on cryptic tweets from Musk. Secondly, the potential long-term uptrend in TSLA might be tested more severely in the coming weeks as the stock has been spared the bulk of the aggressive selling since investors were waiting for yesterday’s announcement. The rising 200 day moving average is now around $220, and that will be a big level to watch in the coming weeks to see just how much demand remains for TSLA stock.