Tesla’s stock price hasn’t been reasonable for a number of years now. But it is the same ol’ discussion. I’d suggest shorting Tesla but someone will then come along like clockwork with an overused quote about how the market can remain irrational...and they’d be right. Buy in, or ignore it, those are your current options on Tesla.
That's possible, but you're not really making the argument (or any argument at all if it's just "you're wrong") why Tesla should be worth more than multiple car companies combined, companies that turn a profit and sell loads more cars. Forward-looking? Only if the one looking forward is delusional.
Tesla isn't a car company. It's an energy company that started with cars.
That fact isn't sufficient to justify its price, but it's a critical component. Just measuring it against car companies misses a large fraction of its value -- maybe even a large majority of it.
Some people point to Tesla's margins, which are very high by industry standards. However, IMO these margins will decrease as real competition ramps up and the market turns further from performance/enthusiast to true mass market vehicles.
I believe all their current main stream competitors (Ford/GM/Volvo/Toyota/Honda) are all going to be facing serious challenges. I worked on some projects for car dealerships and the surprising profits come from their maintenance. I just don't see how you can make money with maintenance on an electric car so I think they will shut down like Blockbuster. The issue we found was when the electric cars make it to the floor, the sales rep has no incentive to sell it because their dealership will go out of business. I haven't had someone give me a logical explanation to avoid this. Either we get mass dealership bankruptcies, or the dealers get bought out by the company. The best dealers I know got out a few years ago.
The other part is they are giving away all their trade patents and want to create competition. When I play Madden and I am up 14-0 late in the first, I like to keep others in the game otherwise their wifi drops and it feels like Tesla is doing the same with their competition.
Another argument in my mind is what I learned from BlackBerry and Apple. When I first got into BB, it was the market leader and their financials were off the charts. I understood market cap and numbers and it just made financial sense but the market is forward looking and when Apple took over I missed the boat and sat for a long time with shares. During that time Apple (the company whose products I hated because it was so simple and restricted) went from a cool tech company (Jobs) to a business company (current CEO) and my thought at the time was the market would kill them as they no longer are going to be a cutting edge innovative company, however, that was just the start of Apple as they were finally making real money and gouging everywhere. Also at the same time, BlackBerry made profits for a single quarter and its stock started rallying however their product was dying and the consumers had lost faith in it and were looking for something fresh. The first BlackBerry Z10 is basically what Android 10 and iOS is today yet the market didn't want it.
This is what I see is happening in Tesla now. You have a company finally making money. They have an innovative product and are still a tech company. Everyone in the energy space wants to work for them also. I like to think I worked with some of the smartest solar electricity engineers in Canada and the some of smartest ones are now working at Tesla now. They just made profits which the market loves, they were announcing BlackBerry is back when that happened. I haven't had enough cash to hold Tesla as I lost most of my net worth on BlackBerry but my first position was early 2013/2014 with 200 shares and made 30% got out. Then I got in around $390 before it split and sold around the $1600 mark. I bought in again after the split and I am going to continue adding to the position, currently up about 30% again.
Also the fundamental business side of me sees them getting added to the S&P 500 so I would expect they are going to be bough heavy so I am planning to add more to my position soon.
Disclaimer: I also saw the Elon manifesto pretty early on, 2006 and was convinced this is the future but I was still interested in buying Canadian so I supported BlackBerry.
TLDR: Canadian who bought BlackBerry and got burned. Learned from it and bought TSLA now. Leading product, finally making money, everyone wants to work for them and they seem to not care about competition.
From what I can tell, dealerships are not owned by the car manufacturers. These guys are not dumb and will adapt.
Other car manufacturers are borrowing the Tesla reservation model (see Ford Bronco, GM electric Hummer). They are offering extensive customization. Like Tesla, dedicated service shops will be necessary to perform even basic maintenance and retrofitting, so maybe that could keep independent dealerships afloat.
Regarding Tesla itself, what other structural advantages (besides a head start and cool factor) do they have over the competition that will prevent their margins from eroding?
See I don't think that's true. They aren't smart. Everyone hates dealerships. Tell me one person that likes their dealership? They deal with them because they have to for the warranty then they get a new car when their lease is up because it's easier to deal with compared to mechanics. I just want to pick the exact car I want and get it. It's nearly impossible with any other dealer (This is the typical customer as I buy used cars but I will be buying the Tesla Truck if TSLA shares pay).
The dealers are not selling it today. I used to go into the Nissan dealerships frequently and the Leaf used to be under a tarp. They had no incentive to lead the charge and now they are behind is my thinking.
The big advantage I see is the dealers. Them being not owned by the dealer is the problem. I think Elon saw this early on as he wanted to own his own dealerships because there was no money in their business model. Also the dealerships don't want to be mechanic shops as the money in a mechanic shop is not the greatest return on money as they lose out on all the added profits of sales, dealer rebates and interest. In addition to first mover and tech, their charging station, the best talent and they have solar (I was also a SCTY investor) which means they have the entire market cornered I think. They also produce their own batteries.
Honestly the main reason is they said, here is our design, go copy us, we know you can't do better. When someone tells me that I respect it and that's the tipping point for me.
Edit: Most the dealerships in a city are owned by the same person from my understanding. So the big auto malls with Ford/GM/Toyota is all owned by 1 person.
