Tesla Motors Inc (NASDAQ:TSLA) recently announced the grand plan to construct a $billion gigafactory in Nevada, and the company received approval of the lawmakers plus the Governor. That means bigger things for Tesla Motors Inc, but it could mean something as well on the core business of the company.
According to Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk, the gigafactory will have a capacity bigger than that of the current battery production of the world combined. That means everything including batteries for mobile devices and other wearables.
The announcement comes at a time when Tesla Motors Inc (NASDAQ:TSLA) has been doing generally very well in the market. Though the company stock went down to a saddening 11% on September 4th, the stock has been having a good run in the market this year, achieving an increase of 39% rise.
However, for some investors, they feel like they have a reason to worry. First, JP Morgan’s dropped their bombshell, expressing their misgivings towards Tesla Motors Inc (NASDAQ:TSLA). They gave Tesla Motors Inc a neutral rating and said that the future of the stock isn’t certain because of the possibility of poor performance resulting from fluctuations in the prices of essential metals.
Ryan Brinkman, one of JP Morgan’s said:
“We are more cautious on Tesla, however, with our Neutral rating balancing incremental news flow likely to track positive with valuation that appears stretched and execution and competitive risk that seems underappreciated…”
While many people feel that Tesla Motors Inc (NASDAQ:TSLA) is on the right direction, others have the fear that the company’s core business could slow down due to focus being redirected towards the Nevada mega plant. As unfounded as it may seem, such individuals consider the fear of a new technology coming up after the gigafactory has been set up. That will be billions of dollars lost as the plant may be rendered obsolete.
That’s why for some investors, applying JP Morgan’s caution does it.
This article has been written by Victor Ochieng.