Investors keep ignoring catastrophically disappointing Tesla earnings
Shares continue to hover around $230, after having climbed back from a huge dip in early 2016 that saw them plummet to near $150.
On Wall Street, everyone is reassessing their investor relationship with Elon Musk's electric-car maker - especially now that Tesla has decided, through the $2.6 billion acquisition of SolarCity, to transform itself into a full-service purveyor of green energy and sustainable lifestyles.
But something interesting is now happening with Tesla's stock - after a lengthy period of notable volatility.
One of the guys
Since the beginning of the year, Tesla shares have been moving more or less in parallel with other automakers. At Business Insider, we follow General Motors, Ford, Fiat Chrysler Automobiles, Ferrari, and Tesla closely - so I've overlaid all five on this chart:
As you can see, Tesla has higher highs and lower lows. But otherwise in 2016 its stock has mirrored the moves of the rest of its sector. (A note on FCA trading well below its peers: Ferrari's initial public offering took a lot of value out of the company, and that's why you see a huge dip at the start of the year.)
To be honest, I was a little surprised when I saw this. But if you control for Tesla's boom-and-bust episodes, which are driven more by news than by anything financially fundamental, the story becomes clear: Tesla is turning into a real car company.
I'm not sure Musk is happy about this. Tesla has never wanted to be a real car company. In fact, its willful resistance to doing things the way everyone else does has been both an advantage and a liability.
It's a plus that Tesla has set itself in opposition to a traditional and often hidebound industry. But it's a negative for the company to be turning itself into a mass-market carmaker with the sensibility of a startup.
The former has made Tesla the most impressive car brand to come along in decades. The latter has caused it to miss production and delivery targets and to build vehicles, like the Model X SUV, that are needlessly complicated.
The new battle
Even now, Tesla isn't conceding its fate. Over the next two years, it's critically important that the company successfully launch the Model 3, its $35,000 car for the rest of us (versus its $100,000 luxury machines, like the models S and X). But Musk doesn't sound like he wants to scale in the conventional way.
Instead, he wants to reinvent something called "vertical integration," which is the way car companies operated in the periods before and just after World War II. Effectively, they did everything themselves, as exemplified by Henry Ford's legendary River Rouge factory, where train cars laden with iron ore rolled up to one side and finished cars rolled out the other.
Vertical integration was decisively displaced in the 1980s by so-called lean or just-in-time manufacturing, and the industry hasn't looked back.
Until now.
Musk's idea is that if he controls every aspect of production - he often points out that Tesla's biggest constraint is that it's only as fast as its slowest supplier - he can radically improve the manufacturing process.
This is the "alien dreadnought" concept, which he outlined on an earnings call last week: His criteria for an innovative factory design is that he'll know it's working when it no longer looks like a car plant, but rather like an alien spaceship.
Why fight the power?
On one hand, Musk isn't arguing for some crazy new idea here; futurists have speculated for decades about what a fully automated manufacturing facility would be like.
On the other, this is kind of a convoluted way to build a relatively inexpensive vehicle in the Model 3. If Tesla wanted to, it could easily outsource production to a big industry player like Magna and hit its production and delivery marks.
But that would be the predictable thing to do. And Musk hates predictable.
However, Tesla's story is shifting back to a Wall Street one. For a long time, the tale was one of growth, disruption, and share prices that rocketed from $20 to almost $300, delivering a gain of more than 1,000% to early investors.
But then the narrative was about Tesla becoming a much bigger carmaker, with all the dreary plug and chug, nuts and bolts, and blocking and tackling that such a shift demanded.
Look where we are now - Tesla is once again a stock story. But like all the other automakers, it's a boring stock story. Sure, the valuation is quite high. But even losses double what analysts expected in the past quarter can't take a toll.
This raises a huge question: If Tesla somehow notched a profit on quarter, would the stock explode?
I'd like to know. Unfortunately, there isn't much chance of that happening anytime soon.