The Bull Case for Tesla Inc Stock Is Starting to Crack

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For Tesla Inc (NASDAQ:TSLA) stock, it’s all about confidence. The contentious bull/bear argument over the TSLA stock price is a battle over what profits will be next decade and the decade after. That’s a big reason why I’ve long cautioned humility from investors on both sides of the debate.

There’s still a long way to go for the Tesla story. But, of late, I’ve become increasingly convinced that investors are starting to lose confidence in both TSLA stock and CEO Elon Musk. Too many promises have been broken, most recently relative to Model 3 production targets.

And it’s worth pointing out that TSLA’s 20%+ pullback over the past two-and-a-half months began with a downgrade from an analyst at Jefferies. Slowly, the Street seems to be turning on Tesla stock and investors are following. The TSLA stock price is holding at support just over $300. But breaking through that support suggests another 20% downside, and I believe that type of move is on the way.

Can Investors Trust Musk?

So much of the optimism behind Tesla stock is tied up with its charismatic CEO Elon Musk. Then again, so is much of the pessimism. To Tesla bulls, Musk is a visionary set to transform the world’s energy usage. To some bears, Musk is little better than a snake oil salesman, whose promises often aren’t matched by reality.

Recent developments might be impacting Musk’s reputation. A Rolling Stone cover story had some revealing passages, but also raised some questions. Musk’s characterization of TSLA stock short sellers as “jerks who want us to die” might raise some hackles among hedge funds and other institutional investors.

At the least, it seemed an unfair charge given that Tesla is burning cash while its stock is dearly valued, as Musk himself admitted less than five months ago.

Add to that this week’s announcement, which many investors initially thought was a joke, that Tesla is going to send a Roadster to orbit Mars, and some investors might start questioning Tesla’s leadership. With Model 3 production behind schedule, shouldn’t Tesla be shipping cars to Earth-bound customers first?

The Street Loses Patience in TSLA stock

Wall Street probably will have a little say on Tesla’s long-term valuation. But until Tesla generates consistent profits, it will have a big impact on how the stock trades. And it does look like analysts are losing confidence. The consensus target is $310, only modestly above current levels.

And the most recent firm to turn bearish is JP Morgan Chase & Co. (NYSE:JPM). Analyst Ryan Brinkman cited a laundry list of risks, including continuing Model 3 production problems, the end of a federal tax credit, competition and long-term margin concerns.

The thesis seemed to focus on 2018, with further Model 3 delays and a need for yet another equity offering potentially pressuring the TSLA stock price. From a short-term standpoint, Brinkman makes a good case. Investors clearly are more bullish on Tesla’s competition.

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