There’s nothing more satisfying than being right, and if you’ve been a bull on electric carmaker Tesla Motors Inc (NASDAQ:TSLA) the way I’ve been, you are likely basking in the afterglow of your own prescience.
On Wednesday, Tesla Motors Inc (NASDAQ:TSLA) reported a second-quarter net loss of $30.5 million, or $0.26 a share. That figure was a huge improvement from the loss of $105.6 million, or $1 a share in the same quarter a year ago. Revenue also surged, coming in at $405.1 million from $26.7 million a year ago.
The company’s calculation doesn’t comply with generally accepted accounting principles, or GAAP, but the fact that Tesla Motors Inc (NASDAQ:TSLA) can be considered in the black when excluding items is something that came as a big surprise to Wall Street.
I find it interesting that many analysts called Tesla’s earnings a “surprise.” Not that a very big beat like this isn’t a surprise; it is. But surprising Wall Street, as well as all of the skeptics, has been the raison d’etre for Tesla and its brilliant founder and CEO Elon Musk. The technology entrepreneur who created PayPal has expertly steered Tesla Motors Inc (NASDAQ:TSLA) to near icon status in just the decade since its founding.
The chart below shows the stock’s phenomenal 400%-plus surge in the past 12 months.
As a TSLA bull, another thing I find particularly satisfying is that the stock continues to defy the short sellers. In fact, Thursday’s big jump in TSLA shares has a lot to do with short sellers scrambling to cover positions that keep getting crushed. These shorts are hoping for a Tesla Motors Inc (NASDAQ:TSLA) mishap that will take the shares down, but so far they’ve been dead wrong.
As Musk himself said almost a year ago during an interview with Liz Claman of Fox Business News, “I think it’s very unwise to be shorting Tesla. I think there’s a tsunami of hurt coming for those holding a short position, and it’s going to be very unpleasant. I advise people to exit while there is time.”
The lesson here for the short sellers, skeptics and naysayers: Stop betting against Elon Musk and Tesla.
Of course, at some point, the short sellers could be right about Tesla. But at some point, the sun will run out of fuel to burn and life on Earth as we know it will cease to exist. As for the current moment here on Earth, at least from a trading perspective, TSLA shares are firing on all cylinders.
Now the question for the bulls is, how much more upside is there in TSLA shares? To answer that big unknown, let’s take a look at where Tesla is right now.
In Q2, the company boosted vehicle production of its flagship Model S sedan by some 25% to 500 vehicles a week. That’s tiny by Big Three automaker standards, but amazing for a startup selling a vehicle with game-changing transportation technology. Tesla produced 5,150 vehicles in Q2, well above its original forecast for just 4,500 deliveries.
The increased unit production helped Tesla increase gross margins 22% on a non-GAAP basis over the same quarter last year. In his letter to shareholders, Musk wrote that Tesla can deliver approximately 21,000 cars this year. He also wrote that the company is on track to achieve 25% gross margins for the year (based on a non-GAAP calculation).
If Tesla Motors Inc (NASDAQ:TSLA) can execute on this margin prediction, and if the company can continue to “surprise” analysts who don’t yet understand that betting against Musk is a foolish game, then the smart money will continue to jump into Tesla — and so should you.
Recommended Trade Setup:
— Buy TSLA at the market price
— Set stop-loss at $140, approximately 10% below the current price
— Set initial price target at $200 for a potential 30% gain by year-end
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