Few stocks get more attention than Tesla, Inc. lately. Should Wall Street be bearish or bullish about the popular energy corporation? The answer depends on the facts investors choose to consider. I know, that is just a fancy way of saying it is anyone’s guess, but I don’t come empty handed. Here are a few bear cases about the Elon Musk business.
Trust in CEO Elon Musk
Tesla, Inc. has grown synonymous with the billionaire revolutionary sitting at the head of the board table. That might seem good and well. Perhaps no other person could have pushed the corporation as far as it has come. But that is a dangerous perception for people to hold. Enter one of Tesla’s biggest risk factors: key-man dependence.
What would happen to the company if Musk decided to resign? The day will of course come eventually. However, are investors ready to trust their Tesla values in the hands of any other CEO? I argue otherwise. Very few other stocks have their worth so closely tethered to the company head as TSLA. Perhaps Musk leaving wouldn’t mean Tesla’s ruin, although it could send share values crashing.
Musk has been through Tesla’s worst moments. The man has put a turnaround on the most dire corporate circumstances, even pulling the company from bankruptcy. The name Elon Musk is at the top of every Tesla comeback, at least in the eyes of investors and the public. The man is a global hero in his own right and finding a man better suited to fill his role will be a hard sell.
Trust in the Model 3
The Model 3 is a dangerous move and there is more to why Tesla isn’t going out of its way to shove it down our faces. For my repeated arguments about how it will dig into Model S sales, consider reading this. But there is also the case of investors looking for way, way too much out of the car. It is more affordable? Yes. Is that a good thing? You decide. Will it secure more than 200,000 purchases per year beyond current reservations? I’m skeptical.
Tesla has a detailed history of spectacularly missing its own projections. And the last too successes were close calls. Only 30 Model 3s in July? Well done for meeting your release deadline, Tesla. Just half a million more and counting. Sales projections barely made it past projections in June, too. The disclosure sent shares retreating in value.
Now it’s all Model 3 this and Model 3 that. But Tesla’s production ramp does not mean it will buy more cars, only that the company is gearing up to make a lot more. The abandance of Teslas is not an abandance of buyers. The electric car market is still very much in its infancy an rivals are crawling out the woodwork. Tesla is not poised for mass market domination any more than Nissan, GM or Chery all the way in China.
The Model 3 is a new car with a lot of initial hype. So was the Model S and Model X. Investors ought to calm down and consider the effects of the naivety fading, as well as tax discounts.
The company itself has admitted to overblown share values. Ask any analyst worth their weight in salt and you’ll hear the same opinion. TSLA is rich, which spells danger for investors. Considering the company’s sales history, lower-than-expected Model 3 sales could send the stock on a downhill streak. That’s not at all overblown either considering that recent share confidence ride on the company raking in the mass market.
Once momentum starts going in one direction it can be pretty hard to slow. For a self-proclaimed overpriced stock that relies on fanfare and optimism, Tesla Inc. is aApple massive gamble.
Run away from Tesla, Inc?
I know, I know. Us Tesla, Inc. bears are wet rags with our consideration of the facts and traditional value metrics. Perhaps we don’t like how Musk makes crud of our projections and negativity. After all, with a 1,400 percent climb from its IPO, the company must be doing something right, right?