By any conventional measure, today is a good day to sell stock in Tesla Motors Inc (NASDAQ:TSLA). Assuming it is truly range bound, as I have written that it is, then TSLA stock is now very near the top of its range. At $245 per share, the company is valued by the market at nearly $40 billion.
Compare that to the $48 billion of Ford Motor Company (NYSE:F), which makes nearly 2.5 million cars per year, against fewer than 100,000 for Tesla, to get a sense of perspective.
But it’s certain that today’s bearish call will be controversial, because Tesla stock is about more than cars.
TSLA as a Brand
Tesla has become a lifestyle brand.
You can try to tease this out of its logo or just intuit some elements of the lifestyle it represents. It represents luxury, yes. But it also represents independence, like Howard Roark in Ayn Rand’s The Fountainhead — the perfect hero for the Trump era.
The Tesla customer won’t just buy a car. He’ll buy the Powerwall, and when they come out, he’ll buy the solar roof as well, no matter how much they cost. He’ll get a home in the desert, live off the grid, and tell the rest of the world to buzz off. Notice that all the pronouns in this paragraph are male.
That’s the dream, anyway. Brands are dreams as much as they’re reality. Most people who buy big pick-up trucks aren’t working in construction, either.
The point is there could be a lot more revenue per customer than investors thought when TSLA stock was starting out.
What else are the bulls seeing?
Tesla Stock as Reality
Right now, the Powerwall battery looks to be a hit and TSLA owners are happier about their purchasers than any other car owners, by a wide margin. What the bulls are seeing is cars that get updated like smart phones, so that they learn from crashes. They’re seeing year-old cars made brand new, their software updated rather than the hardware replaced.
It’s true that next year’s Tesla may be radically different from last year’s, running far longer on a single charge, for instance. And that charge won’t be free any more.
But bulls never see the glass as even half-empty.
TSLA Stock as Investment
Tesla is due to report its fourth quarter earnings on Feb. 8 with analysts expecting a loss of 20 cents per share, against a loss of $1.29 per share for the same period in 2015 and revenue of $2.23 billion.
We already know that TSLA missed on its delivery targets for the quarter, shipping 22,200 vehicles. That’s less than the 24,500 shipped in the third quarter, and production of 76,230 cars fell well short of the 80,000 to 90,000 target.
Tesla continues to operate only because it continues to get financing. Operating cash flow was positive during the third quarter, but as with that quarter’s profit, it was an outlier, as TSLA stock’s positive cash flow generally comes only from financing.
Digging into the numbers after earnings, analysts will be expecting to find the usual mess of no income, and no operating cash flow, of operations maintained through financing. Tesla bears should know that if the fourth quarter looks like the third, they could be in for a very rough ride.
Right now, Tesla stock can do no wrong, but I’m convinced that, sometime later this year, it will seem that it can do no right. People will listen to the critics, or the company will miss on its delivery schedule (again) and TSLA stock will drop like a rock.
At that point, buy it. This is not that point. If you have money in Tesla stock, take some profits off the table. If you are waiting to buy TSLA stock, let it come back to you. If you’re very brave, short it.
Or do what I do, watch it from afar and enjoy the ride.
Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.
