You watched Tesla stock for quite some time now. Only to witness to more than double its price in the last half a year. And now you are wondering, is it still a good buy? After recent rally, it is true more than ever that TSLA is a classic example of “castle in the air” theory. Sceptics have been pointing out very often the lack of profitability but whoever bought it in the past and held it long enough, received incredible return on his investment. So buy or not to buy now?
Lets go over for reasons to buy first.
- Cybertruck. Every kid already made fun of its broken windows but the truth is, Cybertruck has a potential to revolutionize truck market in the US. Electric truck used to sound like an exceptionally bad idea because electromobiles have a stigma of being for sensitive people, leftists, metrosexuals, you name it. Exact opposite of a typical pick-up truck buyer. But Musk delivered incredibly badass looking vehicle straight from a post apocalyptic world. He even used the downfall of high-strength stainless steel, expensive molding, to its advantage when he used simple geometric shapes. I have no doubt it’s going to sell and boost Tesla’s numbers.
- Gigafactory in China and Europe. Avoiding tariffs and boosting production capacity, new factories are no brainer. Tesla is now a global brand with globally attractive models and how many US designed and made vehicles of recent past can say that?
- Elon Musk. Think what you want. He might be a little bit crazy and hard to live with but we are not planning on marrying him. On the business side, Musk has a track record of delivering. Not many visionaries are also great managers at the same time. Tesla is very much possible only thanks to his personal talent and perseverance. In this regards, the resemblance to Steve Jobs and Apple is insane.
Those are the 3 major reasons why I would still consider buying TSLA even close to an all-time high. But now let’s go over some major downfalls.
- Incredibly overpriced by any standard metric. How much is a company that has no history of annual profit really worth? No matter what you use to multiply the profit, X times zero is still zero. Can even electric cars be profitable? If anyone can make them profitable, it is going to be Elon Musk. But right now, stocks are priced at valuation making Tesla second most valuable car manufacturer in the world. So even if this American electric miracle becomes world’s #2 one day far from now, valuation already includes that. Potential downside, on the other hand, is immense.
- Electromobiles still have to prove themselves being a viable alternative. Most of the electric hype is revolving around the alleged better ecology. But electromobiles are heavily subsidized by governments around the globe (Even in USA, you can still get a tax credit for buying one) and still not showing convincing sales. And a lot of Europeans remember how turbodiesels were praised in early 2000’s as a pinnacle of ecological behavior only to be recently shamed as dangerous polluters of city centers. Can the humankind (with a typical delay) acknowledge the fact that lithium life cycle from mining to disposal is highly toxic to the environment and doesn’t make much sense?
- Elon Musk. Yes, I put the man into assets as well as liabilities. Because the brand relies so heavily only on one person. What if he goes crazy tomorrow (his dating choices are definitely becoming progressively crazier and crazier) or dies of overworking? Or shoots himself to Mars? OK, we already covered the crazy part.
Of course, all of these reasons not to buy can be made irrelevant if crowds of blind Tesla fans keep pushing the price indefinitely. But do you really want to bet your money on that? The stock is worth only as much as the next guy is willing to pay for it. The final decision whether to purchase it or not must be yours only but my take on it would be at least a very careful approach. If you buy it this high, decide ahead of time on a strict stop loss.