More than a year after Elon Musk's notorious 'funding secured' tweet, Tesla stock has recently reached the price of $420.
Generally, the news surrounding Tesla has been very positive as of late:
With Tesla stock reaching an all time high in December 2019 and currently still sitting above that $420 figure.
As well as this, Tesla recently announced they are delivering the first China-made cars from their Shanghai factory.
There have also been many incidents that have lit up social media and a truckload of memes!
Let's take a look at the bullish and bearish takes on Tesla just to get a sense of what the overall picture looks like for Tesla.
Let's start with the BULLS:
Some say Tesla is still undervalued relative to the white space they have in terms of the broader trend that is the electrification of cars.
Some emphasize the developments in China as bullish due to the ability to produce more cars at a lower cost.
Some emphasize the recent profitability achieved by Tesla and the fact that they have the best mainstream electric cars with the best 'moat' provided by the strength of their brand.
Let's see what the BEARS have to say:
Well some are bearish due to the possibility of a recession in the next 12-24 months, and the impact that would have on the stock price. This follows the yield curve inversion and the historical implications of such an event.
Some say Tesla is a cult stock and is too heavily reliant on Elon's ability as a 'meme master'. Although this is kind of a joke it is actually a good point, and this is the main reason that the Tesla board approved Elon's very ambitious new incentive structure, which could end up being worth $184BN if he delivers.
Some also say the stock price is just overvalued, particularly compared to other car manufacturers. For example, Tesla has double the market cap of Ford, with Ford shipping 6 million cars in 2018 and Tesla shipping only around 250,000 cars in the same year. Tesla sales picked up in 2019 though.
Tesla is relatively unique as a stock pick in that people either seem to worship it religiously or hate it with a passion, and it is important to understand people's incentives when giving their take in the media. People who have shorted Tesla are hardly going to paint a bullish picture during interviews.
I would like to also highlight another angle:
Is the true smart money buying SpaceX shares?
Like many private companies that have yet to go public, investment here requires Accredited Investor status - which in my opinion is certainly not meritocratic.
With SpaceX being valued at $33.3BN in March of this year
And more recently, Morgan Stanley Research claims SpaceX could be a $120BN company if its Starlink global internet service takes off.
With their current valuation estimated to be $52BN.
So SpaceX is certainly a very interesting business.
The last thing I want to bring up is the cult like factor that Tesla and particularly Elon Musk are developing.
Much like Apple have such strong brand power, Tesla seems to be developing a similar aura.
It is very important to understand why people pay $1000 for a new iPhone when they could buy a cheaper model and invest the difference, and the social signalling aspect that companies such as Apple have developed.
People (particularly those in the upper middle classes and above) could potentially look at driving a Tesla as a 'flex' and we can see Tesla appearing in popular culture. This could prove a powerful factor in the years to come.
{Disclaimer, this is not investment advice}
In my opinion, it is difficult to bet against Tesla and I personally wouldn't recommending shorting Tesla. At the same time, I wouldn't necessarily say it is the best risk/reward in terms of going long, particularly at this valuation and at this late in the cycle. I think Bitcoin is a better asymmetric hedge in the next 5-10 years that potentially has higher upside - particularly with the central banking money printing spree.
Also, some say SpaceX has a better potential upside over the long term, particularly if one is an accredited investor and able to get shares at private valuations via for example a Special Purpose Vehicle (or SPV) but that requires access to certain legal infrastructure, whereas stacking Bitcoin does not!
Some even have a $4000 target for Tesla - which is around a 10x from here. Personally, I think in a decade Bitcoin will be a lot higher than 10x from its current levels.
Conduct your due diligence and understand what level of risk you are comfortable with.
What are your thoughts on Tesla?
Are you a bull or a bear?
https://www.youtube.com/watch?v=14h8Mka0Di4
BRAVE BROWSER: https://brave.com/fin894
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