The latest news about Tesla (NASDAQ:TSLA) may have sent its shares soaring late last month, but almost as soon as it began, the Tesla stock rebound seems to be losing momentum. This is not surprising.
Yes, on the surface, a trio of recent developments sound very promising for the EV maker’s growth going forward. These include the company’s robotaxi and low-priced vehicle plans, as well as news of the Chinese government giving Tesla approval to sell its Full Self Driving driver assistance technology package in China.
However, a closer look reveals how neither one will really move the needle for Tesla. These developments aren’t likely going to provide much of a boost to sales, profitability, much less TSLA’s stock price.
To make matters worse, Tesla’s biggest problems have yet to go away. All of this points to more trouble ahead for shares.
Tesla Stock: The Latest Hype is Fast Fading Out
If not for some exciting updates from Tesla CEO Elon Musk, chances are that the company’s most recent earnings release would’ve been a dud. For the preceding quarter, both revenue and earnings fell short of analyst forecasts.
Musk’s positive updates on full year deliveries and robotaxi efforts drove a post-earnings rally for TSLA stock. Just days after this well-received earnings release, Musk followed up by pulling off another accomplishment lauded by the market.
Last weekend, Musk visited Chinese government officials in Beijing to lobby for regulatory approval to sell Chinese Tesla owners its FSD package.
Garnering the regulatory go-ahead, Tesla stock yet again made a big leap, surging to as much as $198.87 per share on April 29. However, hitting such prices marked the peak of this would-be recovery.
Shares have since pulled back. Sure, this may represent some profit-taking, ahead of the next big leap. Then again, maybe not. At least, given how much these latest updates matter when it comes to Tesla’s prospects in the coming quarters.
Why Recent News Isn’t Exactly Big News
The aforementioned news regarding Tesla stock may seem like factors that could help boost the bull case, but again, look beyond just the headlines. For instance, consider the latest updates regarding Tesla’s much-awaited robotaxis.
Musk may have conveyed to investors the big potential for robotaxis to disrupt the ride-share industry, it remains to be seen when this vehicle will become available.
Tesla plans to “unveil” the vehicle this August, yet remember that this is the company that “unveiled” the Cybertruck five years before its actual debut.
Regarding low-priced vehicles, Musk was vague in his statement about them becoming available far sooner than previously anticipated.
Pending further information, it may be best not to overestimate how quickly this factor will help to improve Tesla’s fiscal performance. Finally, as for the China FSD news?
This news may have driven a big spike for TSLA, but as Citi’s Jeff Chung has pointed out, at best, Chinese FSD sales may only add 10 cents per share to the bottom line.
Taking all of this in account, it’s clear that the latest news with Tesla is not exactly enough to justify a mega rally. Meanwhile, issues with growth and margins appear likely to continue.
Bottom Line: Sell Into Strength While it Still Lasts
As pointed out in our last TSLA article, softening demand in the U.S. and especially China appear likely to continue affecting Tesla’s top line in the near-term. Coupled with lower margins, it’s hard to justify the stock’s valuation based on current operations alone.
These headwinds are fast coming off the back burner, and are starting to outweigh the hope and hype generated from the robotaxi, low-priced vehicle and China FSD news. While downside risk may not be massive, I wouldn’t count on a continued recovery for TSLA anytime soon.
Given how there is far greater opportunity out there among mega cap tech stocks, there’s little reason to waste your time, not to mention risk your capital, with a TSLA position.
If you currently own Tesla stock, sell into this latest strength while it lasts. Otherwise, stay away.
Tesla stock earns a D rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.