Gadfly Columnist: Tesla Investors Need To Lower Expectations Before Loving The Stock

There is much to love about Tesla Inc TSLA as a company, but fewer reasons to love the stock as it stands, according to Gadfly's Liam Denning.

Tesla's stock is now worth $9 billion less than it was valued at to start the week and comes at a time when its Model S sedan failed to obtain a top crash rating, Denning noted. Meanwhile, the competitive pressure in the electric automobile space drastically changed after Volvo said it would partly electrify all new car models as soon as 2019. On top of that, Tesla's production and delivery numbers for the second quarter fell short of expectations and struggled to hit the company's own guidance.

At 62 times projected EBITDA, expectations for Tesla's stock might be a bit high. But Tesla's Model 3 sedan could be a game changer so investors have plenty of reasons to be excited despite a rough few days.

The problem is that investors are excited because of the lofty expectations for the mass-produced and more affordable Model 3, Denning added. Tesla CEO Elon Musk said last year the company can produce 100,000 to 200,000 cars in the second half of 2017.

If Tesla is having problems hitting its current delivery targets on existing cars, how can it deliver on promises? The answer is simple: "To be a Tesla bull, it is of course necessary to have high hopes for the company's long-term success."

Left Hates Tesla's Stock

Andrew Left of Citron Research doesn't like Tesla's stock at all -- that is, from the bullish point of view.

Left added to his short position in Tesla at the $350 level, he explained to CNBC on Wednesday. His thinking is simple: investors referring to Tesla as a car company is a "good thing" for shorts such as himself because it means that the company's profile is constantly changing.

Perhaps Tesla is having an identity crisis, the short seller suggested. While some refer to it as a car company, others refer to it as an energy storage company -- and even a future rival to Uber.

Perhaps more important, assuming Tesla is a pure-play car company, how is it possible for it to be profitable in the future in a more competitive environment when it can't even profitable today when the competition is very weak?

"That is a very high level but simple thought on the auto business," Left said. "On the other side of the business, show me. In order for this stock to go where it is right now everything has to go right."

Bottom line, owning Tesla's stock is like "discussing religion with people."

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