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The one chart that should give Tesla investors a panic attack

If you follow comments from Tesla’s CEO Elon Musk, you already know Tesla’s biggest problem is keeping up with incredible demand for the company’s cars. Analysts, however, are starting to call foul. John Lovallo (Bank of America Merrill Lynch) went so far as to lower his price target on the stock to $65 based on what he says are demand problems at Tesla.

Is the market really overvaluing Tesla by almost 70 percent? If you believe numbers from Paulo Santos, Think Finance (source), perhaps it is. Here’s a chart showing Tesla’s production through Q4 of 2015, along with Santos’ estimate for Q1 in 2015:

tesla-production-numbers-chart-2015

“Tesla’s management and the bulls consistently argue that the company can stimulate demand at will and that the true issue is capacity and supply,” Lovallo writes. “In our view, this optimistic thesis has been largely debunked, given that we now know Tesla is producing at levels that are both well below past run-rates and the company’s current installed capacity. In other words, Tesla appears to be pulling back on production, which we believe could create the appearance of rising demand” (source).

CEOs can be overly-optimistic – visionary even, which I’d argue Musk is – but numbers are the only yardstick we have to measure supply and demand for Tesla’s cars. If the company’s production numbers are shrinking in the face of rising demand, then there’s an operational problem at Tesla that needs fixed.

If production numbers are slipping because the company needs to demonstrate demand for its vehicles, there’s a serious problem that could lead to a massive plunge in Tesla’s stock price.

Tesla’s forecasting production of 55,000 vehicles in 2015. That’s 57 percent more than the 35,000 cars they produced last year. If Tesla produces 10,000 cars in Q1 (as Santos predicts), it’s on pace to produce just 40,000 cars in 2015. That’d be a 14 percent increase over last year’s numbers. That’s meaningful growth for a more mature company, but it certainly wouldn’t justify Tesla’s price multiples.

Tesla’s true Q1 production numbers may be the most closely watched metric in the company’s next earnings report. They can say whatever they’d like about demand, but the proof is in the number of Model S sedans that roll off the line.

Tesla’s planning to start production on its Model X this fall. It’ll be interesting to see what happens. If the company can boost Model S production while concurrently launching the Model X, the company will go a long way toward silencing the Lovallos of the world. If the Model X is delayed, and Model S production numbers sag, look for the shorts to have a heyday on TSLA.

Tesla heading for a 68 percent plunge?

If you’re looking for all the bearish arguments against Tesla (TSLA), look no further than analyst John Lovallo of Bank of America Merrill Lynch. Earlier this week, he lowered his price target for the electric car maker from $70 to $65 (per Business Insider). That’s 68 percent less than the stock’s trading at right now (around $204)!

Lovallo believes Tesla’s grossly over-valued for one reason: lack of demand. Tsk-tsk, says Tesla CEO Elon Musk. Demand’s not he problem, supply is. Why then, Lovallo wonders, are Tesla’s factories underutilized?

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Investing secrets: Compounding dividends are the only thing that matter

I was having dinner with a longtime friend recently and dividend stocks came up in conversation. “Why would I want to invest in dividend stocks at 3 percent, when I can invest in real estate and make a whole lot more?” he asked.

That question always make me wince.

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How Tesla hits $600 per share

Tesla’s biggest cheerleader has to be Global Equities analyst Trip Chowdhry. Chowdhry’s way out in front of the average Tesla price target of $277.50. His price target? $385. That’s more than 75 percent higher than the stock’s current price. Why’s Chowdhry so bullish?

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Tesla stock worth more than Big 3 combined?

If you’re in search of the ultimate Tesla (TSLA) bull, look no further than Trip Chowdhry of Global Equities Research. He has a $385 Tesla price target. That number’s not based on current car sales; it’s based on the notion that the world’s entire transportation ecosystem is on the cusp of a revolution. And Trip Chowdhry believes Tesla’s leading the charge.

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4 things Tesla must do to hit $300 a share

1) Tesla must hit its second production target date on the Model X. Tesla’s developing something of a reputation for missing its production targets. It happened with the Model S, and it already happened once with the Model X.

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Is Apple really going to manufacture an Apple Car?

Speculation’s running rampant that Apple’s angling to get into the automotive industry. There are two theories here:

  1. Apple wants to make its own car.
  2. Apple’s working on software for autonomous or semi-autonomous vehicles.

On the face of it, the idea of software for self-driving or partially self-driving cars seems more likely. But it’s unclear if Apple’s content to stop there. Let’s look at the facts we do have.

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Apple (AAPL) price target of $165 for 2015?

Most investors have a hard time conceptualizing just how large Apple has become. They’re the single largest stock on any U.S. exchange with a market capitalization north of $750 billion. That means they’re 3/4 of the way to a $1 trillion market cap.

To put that in perspective, the entire U.S. economy’s GDP (our country’s entire economic output for a year) is calculated at around $16 trillion!

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Tesla (TSLA) stock to hit $277 in 2015?

CNN Money logs 20 analysts who are tracking Tesla’s shares. They have wildly different forecasts for the company’s stock price over the next year with one predicting shares will fall to $70 and another predicting shares will rise to $400. Tesla closed at $211 today.

When you look at the median forecast of those 20 analysts, though, the overall projection is bullish.

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Where will silver prices go in 2015?

Silver price forecasters are all over the map in their predictions for 2015. It’s hard to deny there’s something interesting happening in the silver market, though. After falling 20 percent in 2014, silver prices have surged nearly 10 percent in the first six weeks of 2015 with prices now hovering around $17.25 per ounce.

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