Elon Musk is perhaps one of the greatest publicists of our time. The optimistic showman, with his hand on the pulse of consumer desires, knows how to excite investors. He can dance based on setbacks and keep most of us with his great ideas that may or may not come true.
Needless to say, I have immense respect for man. His work ethic and his innovations are unparalleled in modern society. But, at the same time, investors can no longer ignore the real problems that plague Tesla (Nasdaq: TSLA) just because it is the smartest guy in the room.
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Tesla's most recent earnings did not confirm my doubts about the company's growth. A few weeks ago, while we were having a little debate about Tesla, my uncle explained to me that the technology was not as good as most could believe.
This was disconcerting; I thought that technology was the strongest point of the company.
But the claims related to my uncle's technology do not need to be taken with a grain of salt. He is a systems engineer with hundreds of patents in his name, and knows more about technology than 99% of the population. It also has links with some of the most powerful technology companies.
In other words, your comment should not be ignored. In addition, he focused on the protocol (ISO 26262) that keeps cars safe to drive.
As I deepened my research, I also discovered that an old friend and colleague, whom I respect a lot, has been building a bearish case for Tesla over the past month, citing financial problems, unstable profits and logistical problems. The company's biggest problem now is the very slow acceleration of Model 3, Tesla's all-electric sedan.
The car is expected to be a game changer for the company, generating gross margins of 25% in the market. Price range of $ 40,000. But although I believe that the acceleration of Model 3 will finally succeed, I also believe that it will take much longer than investors expect, which will generate further price drops for TSLA in the short term.
Optimistic badysts (some with price targets) for $ 400 and even $ 500 in inventory) need Tesla to sell at least 5,000 Models 3 per quarter to make their numbers work. The consensus now expects around 2,000 units by the end of the year …
… but Tesla only managed to deliver 222 in the third quarter.
This could be the reason why the main badysts of Cowen, Jefferies, Barclays, UBS, JP Morgan and Goldman Sachs have reduced their targets to around $ 200 or less.
The logic of lower prices
Although Tesla has been the best at getting his product noticed, there are other companies in the game with much larger pockets and more solid technology, ready to launch their products. (Names like Toyota, Mercedes, BMW and Acura come to mind.)
Most of Tesla's competition in the electric car space has lagged behind, observing and learning from Tesla's mistakes, and now they have a big advantage. Just as the production in Model 3 is ready to increase, we are also seeing electric offers from almost all automakers … all with price tags that match or undermine Model 3. The Chevy Bolt is currently No. 1. Compact electric car, and has a greater scope than the latest Tesla model.
But Tesla also faces a bigger problem: fully electric cars are simply not selling as much. In fact, in the first months of the year, the average all-electric car sold only 660 units per month.
Combine that data with the production bottleneck at Tesla and a unit of more than 5,000 (per quarter) the sales target for Model 3 seems a bit more confusing.
Elon also believes that his electric and driverless technology is the best on the market. But apart from its rechargeable lithium batteries, a business that is also being attacked by powerful Chinese companies, Tesla's advantage is not what it seems.
If we talk about autonomy (driverless or computer-badisted driving), Ford (NYSE: F) is really prepared to deliver a fully autonomous car in the next decade. In a Navigant Research study that evaluated 18 different companies based on criteria such as technology, vision, production strategy, product quality and reliability, Ford was awarded number one.
Tesla did not even make it to the top 10.  In the general electric vehicle (EV) market, there is no doubt that Tesla has created a solid product that drove the full EV clbad forward quickly. But none of that guarantees a victory for the company (or the sale of 500,000 Model 3).
In addition to the core competition of Model 3, the production of Tesla's high-end X and S lines is expected to decrease as that space becomes saturated.
Performs 25% from a movement of 9.4%
As you can see, it is a less than perfect image in Tesla. And although I think it will be a successful business in the future, the trade that I recently recommended to my readers Profit Amplifier is about the high expectations of investors for the short term.
I do not see how production and sales will increase significantly in the winter months, and I expect investors to become even more critical when profits are not meeting expectations.
Regarding the objective in this operation, we will use a technical support level of $ 280, which is considerably higher than the $ 200 level indicated by some of the world's leading badysts.
Now, instead of just shorting the stock, I recently told my Profit Amplifier readers about a put option we can make. In this business, we only risk a fraction of what we would do by shorting the stock, and potentially we can further magnify our profits.
Specifically, we point to a decrease of 9.4% to the level of $ 280. That would be enough to generate a 25% return during the next quarter with put options.
And while it would not be fair for me to give all the details of this exchange, suffice it to say that I am pretty sure that a similar operation could generate quick returns for interested traders. But instead of flying blindly, I encourage you to check my premium service instead. If follows this link you will see a special report on how my subscribers and I do exchanges like this every week, and how you can do it too. And if gives you Profit Amplifier a risk-free test you will get all the details for this trade, as well as for any other trade we do.
Related Articles  The views and opinions expressed in this document are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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