Why Tesla Inc (TSLA) Stock Is the Ultimate Story for Our Time

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Tesla Inc (NASDAQ:TSLA) shares fell 5% on May 4 in the wake of earnings that disappointed analysts, but numbers would never satisfy the bears nor truly dismay the bulls, because TSLA stock is a story and not just a stock.

Why Tesla Inc (TSLA) Stock Is the Ultimate Story for Our Time

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The Tesla story has something for both sides of America’s political divide, with just enough numbers to whet the appetite for more.

The latest quarter saw car sales of $2.3 billion, up 15% from last quarter, with a 27.6% gross margin, along with solar panel and battery revenue of $213.94 million, up 63% from the last quarter, and margins of 29%. Taken together, there was a loss of $330.2 million, $2.04 per share of TSLA stock, on revenue of $2.696 billion.

The verdict from analysts was that Musk offered big promises but no profits. There was disappointment that the Model Y, a compact SUV, will require a different production platform from the low-cost Model 3 sedan.

None of that matters for Tesla stock.

The TSLA Stock Story

Elon Musk himself is the kind of business hero made a trope by writers ranging from Ian Fleming to Allen Steele and Ayn Rand — a heroic immigrant who takes huge risks and plays by his own rules.

America is filled with real-life examples. Henry Ford was the son of an Irish immigrant. Steve Jobs was the adopted son of a Syrian immigrant. Musk himself was born in South Africa.

As a company, Tesla features tropes from Isaac Asimov and Robert Heinlein, sleek electric cars powered by the sun and reusable rockets, with a little Stewart Brand and a Steely Dan riff thrown in for good measure.

In short, TSLA stock is an industrial romance, a science fiction tale, a uniquely American story you don’t want to put down. If it doesn’t go completely bust, there’s always going to be lift to the stock. 

The Numbers Behind Tesla Stock

I have written that Musk finances his dreams with a stock that periodically rises and falls, although I was alarmed at the latest rise, thinking it overdone.

I think I was right. But you can make money on both sides of the TSLA trade and so long as Musk can keep attracting capital by growing revenue and telling exciting stories about tomorrow, the story will continue.

What caused Tesla stock’s most recent fall was the second-quarter outlook. Only 47,000 to 50,000 cars will go out by June, the Model 3 not going into production until July and non-GAAP margins will decline 2.5% with $2 billion in capital expended, and $115 million of new interest expense from the convertible securities sold in the first quarter to create that capital.

But look to the future, Musk said. He expects a rapid ramp-up for the Model 3, he teased the Model Y as a 2019 launch, and he described very rapid growth in the solar and battery businesses acquired last year with SolarCity, acquisitions skeptics thought would sink the company. 

The Bottom Line on TSLA

Tesla’s first-quarter report dropped its market cap below that of General Motors Company (NYSE:GM), although it remains bigger than Ford Motor Company (NYSE:F). A further fall in the stock price was triggered by the “update letter” (TSLA rejects terms like “first-quarter report”) and Musk’s remarks about the Model Y.

Tesla stock could fall further before the faith of its bulls is shaken. This is a stock that traded at $181 per share as recently as December, and that was at $151 as recently as February 2016. A hard fall in the TSLA stock price is just another plot point.

The latest fall, no matter how financially well-deserved, will be limited by Musk’s promises, which now include a prediction that his robotic software will make the company more valuable than Apple Inc. (NASDAQ:AAPL), its factories are “impossible to copy.”

In 2017 America needs a hero, and it’s a role Elon Musk was born to play. As Musk keeps the numbers spinning, and the audience guessing, the story will continue, although Tesla stock will remain volatile. If it weren’t volatile we wouldn’t care so much.

Dana Blankenhorn is a financial and technology journalist. He is the author of the political polemic Saving Trumpistan, Restoring Democracy, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he owned shares in AAPL.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2017/05/tesla-inc-tsla-stock-ultimate-story/.

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