Wall Street gave up giving honest buy and sell rankings years ago. Everyone knows “Hold” is code for sell, without making the company you are covering too mad to use your bank for future deals. But, even that wasn’t enough, with most firms adding a slew of not-so-easy to decode terms like overweight, moderate buy, underperform, underweight.
All of this is to obfuscate the actual track record of these analysts which is often abysmal. The less accountability on Wall Street, the better.
Is Tesla Stock a Good Buy?
Traditionally, I don’t do buy/sell on stocks. It’s a slippery area, but when folks show up in my comments and email asking over and over again for the same thing, I at least consider it.
Tesla and Bitcoin
I’m writing about Tesla stock today, because I wrote about Bitcoin 20,000 last week (or was it the week before? — Holidays are tricky).
Bitcoin and Tesla might sound unrelated, but their performance and trajectory as late are very similar.
Bitcoin is a revolutionary idea in currency that is so new there is no real way to know how it will react or behave in the long term. Recently, however, all the naysayers have found themselves on the wrong end of a huge, unprecedented run-up in the price of bitcoin based largely on a belief that its future is certain.
Tesla too is a revolutionary car company that can no doubt be thanks for advancing the electric car industry much more quickly than any traditional automaker in the past decade.
Its stock price has also ramped up in a way that suggests those buying and holding the stock are convinced there is no question that Tesla and its products are the leaders of the future. Plus, the S&P 500 just added Tesla stock to its popular stock index. Analysts standing in the way with warnings about Tesla’s stock are quickly mowed down by accelerating (pun intended) price increases.
What Is Tesla’s Real Future?
The trick, of course, is to project the future. Tesla is undoubtedly the dominant brand in the mind of most American car buyers looking for an electric car. But, it has also been the ONLY brand for a decade or so now.
Sure, there have been pitifully marketed efforts by “real” car companies. If you are an electric car enthusiast you have very likely heard of the Chevy Volt, and its successor the Chevy Bolt. But, what if you are not an electric car aficionado? Probably not so much. Ever seen a prime time TV commercial for the Volt or Bolt? Neither has anyone else, but you saw that commercial for the pickup with a new tailgate, right?
Like at most car companies, the Volt/Bolt was an afterthought. A, “Don’t make me do it, I don’t wanna,” electric offering from an American car company being dragged forward into the future… just like always.
But, something has happened on the way to the forum.
It turns out that electric cars aren’t just for environmentalists anymore. It turns out that electric cars are actually better cars if you put a little research and engineering into them. After all, the flaw of all traditional gas powered vehicles is just how much work (and how many parts) it takes to turn the up and down motion of gas powered pistons into rotational energy for round wheels, especially when those wheels are usually several yards away from the engine.
Tesla’s real future, then, depends less and less on itself and more and more on the cars being cranked out by its competitors. Especially as Teslas are still expensive despite building an array of factories and supply chains.
Is Tesla Still Dominant?
Electric car sales jumped to a record 54% of all new-vehicle sales in Norway last year, but Tesla’s Model 3 lost its place as the country’s bestselling vehicle despite a late surge.Electric car sales jump to record 54% market share in Norway in 2020 but Tesla loses top spot – MarketWatch
Norway, which plans to ban gasoline powered cars by 2025 is proving to be an important market for electric vehicles. Tesla obviously does very well there, but was recently overtaken by Audi’s e-tron which targets Tesla’s week spot, the SUV.
Tesla makes a “sort-of” SUV in the Model X, but the X is still more about being a Tesla than it is about being an SUV. You have to buy into the gull-wing doors, and the all-wheel drive is more about wet traction and slippery roads than it is about getting you over Loveland Pass after they close the tunnel. Don’t even get me started on ski racks and camping gear.
The Audi e-tron, on the other hand screams, SUV build by a company surrounded by mountain roads. Unlike the Volt/Bolt, you’ll see plenty of curb appeal, excellent performance and horsepower, and real towing capacity, all from an all-electric vehicle that you’d be willing to take up in heavy snowfall to get first tracks.
Tesla vs The World
And Audi/Volkswagon isn’t the only coming storm. The world’s car makers have finally woken up and realized that customers want electric cars because they are better, not just because they are more environmental. That’s easy if you try.
GM, itself, long the poster child for “I don’t wanna,” threw down the gauntlet with its media blitz, and prime time commercials for its not-even-real-yet, all-electric Hummer. The company is turning its discontinued, gas-hog, Hummer lineup into not a lightweight e-vehicle, but rather a full-throated, come get it, just as awesome (better) at off-road as your old gas guzzling hummer that just so happens to run on electricity. — What car in Tesla’s lineup competes in this category?
And this, is Tesla’s primary obstacle to long-term dominance, in the electric car industry — competition. In fact, the main obstacle is that in a decade there won’t be an “electric car industry,” there will just be a car industry (electric) and a still-gasoline car industry. When these terms shift, the real test for Tesla begins.
With the company just barely catching up on its ability to deliver 3 cars to market, it will have to start going toe-to-toe with companies used to bringing and delivery a dozen or more models tailored to every household to market.
Tesla Stock Investment
Every analyst so far who dared to question Tesla’s stock price, and future, has been mowed down, just like anyone questioning bitcoin recently. That doesn’t mean they are wrong, over some longer timeline.
If you choose to invest in Tesla, know that you are riding a speculative bet that no one can come from behind on Tesla during whatever time period you are planning to hold the stock. That’s a pretty risky bet considering how many competitors are in the rear view mirror (another pun!).
I won’t tell you to sell your Tesla shares or not to buy Tesla stock. There is way more time and volatility to play out there. Just know that this is a trade that you need to watch carefully, maybe with some well placed sell orders. Or, if you’re already way up, some deep in the money puts for a few bucks to hedge that downside.
I guess I’ll follow Wall Street’s example and give Tesla stock a funky new Watch-Like-A-Hawk rating 🙂
This article is for informational purposes only and is not a recommendation to buy or sell any securities. Consult your financial and tax professionals for advice specific to your situation. At the time of publication, the author did not own any shares in any of the companies mentioned, although that could change at any time without notice. The author is not a financial advisor and does not hold himself out to be one.