You can measure this market’s animal spirits simply by looking at the behavior of Tesla Inc (NASDAQ:TSLA). Tesla was unmoored from reality months ago, and now TSLA stock rises and falls strictly on market psychology. More specifically, it runs on bullish psychology, and pulls back when bulls become frightened.
As greed turned to fear in June, Tesla stock had a hard fall. Lately, with greed returning, Tesla is rising again.
Just don’t look for anything like fundamentals from this stock. Analysts are expecting a loss of $2 per share, on revenue of $2.59 billion, when it reports August 2. The loss is about even with the March quarter, the revenue number smaller.
Yet traders are still willing to pay more than five times revenue for Tesla, and barely one-third of revenue for General Motors Company (NYSE:GM), which recently took back its crown as the most-valuable U.S. car company from the upstart.
Musk Sees Trouble
CEO/founder Elon Musk seems to sense trouble ahead. He recently shored up his board with second-generation money — publishing heiress Linda Johnson Rice of Johnson Publishing (Ebony, Jet, etc.) and publishing heir James Murdoch of Twenty-First Century Fox Inc (NASDAQ:FOXA).
Having taken the resignations of the founding Rive brothers, Musk is now thoroughly in charge of what was once SolarCity, which needs Tesla’s distribution to get a price on its solar panels, and Musk’s magic to convince people the company is worth anything.
As the Model 3 finally starts to roll off the floor of his Fremont, Calif. Factory, Musk seems to be admitting that the Tesla game is up. He’s a lot more interested in SpaceX’s reusable rockets, in his Boring Company drilling holes under cities, and even in buying the empty “x.Com” domain, than he is in Tesla cars, which are what investors are buying today.
Buying the Man
Musk’s style is a business version of Donald Trump. He doesn’t address problems. He spins stories. He doesn’t defend, he attacks new challenges. You’re not buying Tesla Inc., you’re buying a piece of Musk.
It just so happens that over the last four years, buying Musk has been very profitable. Tesla stock achieved lift-off in March 2013 and its value is now up more than six-fold, from under $40 per share to its July 24 opening level of $328.
When there isn’t action on Tesla stock, as has been the case recently, analysts like our Bret Kenwell get antsy. Success breeds success, but that just whets the appetite for more success. Success in what, delivering what, matters less than the very idea of success.
If a truck ran over the great Elon Musk tomorrow, this stock would drop very quickly. It is, in fact, a $10 billion-a-year money-losing car company, which assembles lithium-ion batteries in quantity and is opening a shingle plant. It is all held together by one man’s genius and his ability to bang the publicity drum.
The Bottom Line on TSLA Stock
I stopped analyzing Tesla as a company long ago. It’s all Elon, all the time. As I said, don’t look for anything like fundamentals from TSLA stock.
He spins big ideas which he completely controls while they’re great — as with Space X and Boring today. He builds huge factories that may or may not work out under the Tesla brand — the Gigafactories that make cars, batteries, and now solar panels. None of it really makes money. Everything is going to come together — tomorrow.
As a journalist, I can do nothing but admire it. Everybody loves a parade. But as an analyst, I wouldn’t touch it with a barge pole because I’m interested in making actual money with things that work, not with dreams.
When TSLA stock starts to roll over, this bull market will be over. It’s the canary in the bull coal mine.
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 did not hold a position in any of the aforementioned securities.
