Trading Desk: Why The Tesla Truck Dug Shareholders’ Grave

Long-term success on Wall Street often revolves around observing a simple truth. A stock high on hope can climb a long way, but when reality finally catches up with expectations, it’s probably time to sell. That’s what we saw with Tesla (TSLA) this week.

We knew that Tesla tends to disappoint on earnings and then rise from the wreckage afterward. But this time, Elon Musk confirmed what I’ve said for years: the highly anticipated lithium truck looks stupid. It’s not what conventional truck drivers want.

And at a nebulous price point, it’s going to have a hard time competing with conventional gas trucks from Stellantis (STLA) and Ford (F) or even their all-electric counterparts. Elon says production is going to be “enormously challenging.” He says Tesla “dug its own grave” on the project.

The reality doesn’t live up to the dream. We buy a dream and hope it comes true, fully aware that it rarely plays out like we were promised. Musk gambled on this truck design and lost.

He can rebuild, regroup, recover. Tesla can find other growth levers to pull, new markets to disrupt. But the truck dream that shareholders have been chasing for four years now is dead.

That’s the sell signal. Don’t get me wrong, it was a good dream. Shareholders who bought the initial reveal of the prototype four years ago have made a lot of money. They’re still well ahead of the game.

And if you can find another reason to love Tesla, you can hang on for the long haul. However, the short term is going to be challenging while that new narrative emerges . . . if it does.

There’s little urgency to buy the stock until it that moment arrives. That’s when we’ll really know Tesla has hit bottom. For now, I’d rather own STLA. Its dream of electric trucks is still alive. There isn’t a lot of hope here but that means expectations are a lot closer to reality.

Why not own both? If you believe in electric trucks, odds are good that one of the big car makers will make it happen. And throw in a few shares of Rivian (RIVN) for good measure. The dream is real for that company. And there isn’t a lot of hope or hype swirling around the stock right now.