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Why Shares of Tesla Rose 10% in the First Half of 2018

John Bromels, The Motley Fool

What happened

Tesla (NASDAQ: TSLA) stock rose 10.1% in the first six months of 2018, according to data provided by S&P Global Market Intelligence, but it was rough going for investors, as shares swung wildly from below $250 to more than $350. 

Of course, Tesla shareholders probably know by now that the stock market -- helped along by controversial CEO Elon Musk -- is going to give them a lot of volatility for their money. But it's worth pointing out that after the first three months of the year, Tesla's stock was down by 14.5%, and only recouped that money -- and then some -- after a stunner of a June rally.

An overhead shot of a Tesla Model 3

Tesla's performance may hinge on its ability to crank out its popular Model 3 sedan. Image source: Tesla.

So what

Honestly, sometimes it really does seem like Musk has earned the moniker "Teflon Elon," because no bad news seems to stick to Tesla's stock to hold it down for long. Even in early May, when Musk astonished the investing community by derailing his own earnings call Q&A, shares briefly dipped, but recovered almost immediately.

Likewise, the biggest drop of the year so far occurred not after Tesla announced a record loss in Q1, but when news broke of a Model X crash in California that may have been caused by the car's Autopilot system. Even then, though, the stock recovered in less than two weeks. 

What had investors most concerned, though, was the prospect that Tesla wouldn't be able to meet its self-imposed deadline of producing 5,000 Model 3 units per week by the end of the second quarter. But on June 5, with the end of the quarter only a few weeks away, Musk doubled down on the ambitious goal at the company's annual shareholder meeting, further predicting that the company would achieve the white whale of profitability in Q3 and Q4 of this year.

These predictions, coupled with reports of Tesla pulling out all the stops to boost production -- including building an additional assembly line in a large tent outside its factory -- cheered investors, who bid shares upward. In early July, Tesla released a statement claiming that it indeed was able to meet its goal.

Now what

Now that Tesla has proven it can produce 5,000 Model 3s in one week, the big question facing the company is whether it can sustain that level of production. With hundreds of thousands of Model 3 preorders, demand for Tesla's vehicles seems strong. But the company can't rely on temporary production boosts if it hopes to achieve long-term profitability. And it has broken enough production promises already that nobody can be sure what's likely to happen next.

At its core, Tesla is a speculative investment: It's really a bet on Elon Musk's vision of the future -- one featuring electric cars, personal battery systems, and solar roofs all working in tandem. So, in that sense, whether Tesla stock is up 10% or down 14% over six months doesn't change the investment thesis much. Musk certainly isn't showing any sign of stopping his headline-grabbing antics. But even if you're willing to make a bet on his vision, know that you're in for a wild ride.

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John Bromels owns shares of Tesla. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.