The Game-Changing Model 3 Will Drive Tesla to New Heights

The bears have a grip on this stock. Premium electric vehicle pioneer Tesla Motors’(TSLAGet Report) shares have slumped 30%, underperforming the S&P 500. While 2015, during which it gained 8%, wasn’t a bad year for the auto manufacturer, 2016 looks bleak and dismal. Investors keen on investing in technology are looking at other promising companies with “game-changing” products. Do investors really need to worry or should they wait for a rebound, especially with the Model X gaining significant fanfare and the Model 3 promising to be a winner? The latter will enable Tesla to compete for a wider range of consumers. Is it prudent to pay $175 a pop for a company that has $4 billion in sales but no profits to date and widening losses? Perhaps there are better opportunities. However, consider that the company has doubled its sales in two years. The premier maker of electric cars is dishing out huge sums of money on research and development to deliver cutting-edge technology. Despite this spending, there is no significant concern of ballooning debt, with $1.2 billion in cash versus $2.7 billion in debt. Elon Musk has suggested that by the fourth quarter Tesla would make its first net profit, apart from adding capacity and opening more show rooms. But perhaps the biggest plus for Teslas is that electric cars haven’t hit the mainstream. They are considered oddities in a market where the overwhelming majority of vehicles are gas-powered. In addition, Tesla has only offered its vehicles at luxury prices. The current Model S sedan is available for  $75,000 before incentives and the Model X SUV starts at $80,000 before incentives. However, at $35,000, the Model 3 will appeal to those who want a more affordable, mid-sized car.  Tesla will unveil the car on March 31 and deliver the first models in late 2017. TSLA Chart TSLA data by YCharts