Tesla Inc (TSLA) Stock is a Gamble That Elon Musk is the Next Jeff Bezos

Advertisement

The bears are once again coming out of hibernation and sniffing out Tesla Inc (NASDAQ:TSLA) as a potential target. As a love-hate affair with virtually no middle ground, it’s also no surprise that TSLA stock can be quite volatile. You never know which side you’re going to get.

Tesla Inc (TSLA) Stock is a Gamble That Elon Musk is the Next Jeff Bezos

A good chunk of this love-hate is due, of course, to CEO Elon Musk. He’s a disruptor at heart, and as my InvestorPlace colleague Nicholas Chahine notes, Musk takes a page from Amazon.com, Inc.’s (NASDAQ:AMZN) playbook. Essentially, Musk is another Jeff Bezos, and in my opinion, that’s wonderful for competitive synergy.

It’s also the delicate glass floor that’s propping up Tesla stock. If investors lose confidence in Musk, it could be a long way down for TSLA.

Jefferies analyst Philippe Houchois belongs to the doubters’ club. As InvestorPlace contributor Vince Martin observed, Tesla stock was gunning for $400, which would have been a first. Instead, on Sept. 19, shares closed down 2.6% based on Houchois’ price downgrade to $280. He questioned Tesla’s ability to turn a profit until three years down the road. Further, he cast doubts on the company achieving core financial metrics.

TSLA bulls may stridently disagree, but Martin feels that the Jefferies analyst has a point. Martin further explains that “While TSLA bulls see the Model 3 as moving the company toward profitability, it still has a long way to go. Not one of the 20 analysts estimating full-year earnings project profitability next year, or anything close.”

The fundamentals matter — particularly important metrics like profitability and valuation. In fact, they never cease to matter. But to figure out TSLA stock, we have to ask if the markets care.

Tesla Stock is a Compromise

I’m going to take some heat for presenting an unconventional analogy, but the stock market is similar to dating. In my younger years, I was a complete nerd. As a result, my dating life was pathetically slim. Going above my league was considered out of the question. But later, I discovered a secret of sorts.

I may not have been smooth, but I was smart. Many women tended to find opposite personality traits attractive. So if I wanted to date above my league, I had to dial down my expectations on the intelligence quotient. The higher above my league I wanted to go, the more dialing down I had to do.

Next Page

How does this relate to Tesla stock? It’s quite simple — TSLA is a gamble that Elon Musk is the next Jeff Bezos. Those driving up the price to the stratosphere truly believe that Tesla could have the same impact as Amazon across multiple industries.

But it’s unrealistic to say that Tesla stock should have both tremendous upside potential and stable cash flow and profitability. If the company already possessed the attributes that the bears frequently complain about, then TSLA would be another boring name like General Electric Company (NYSE:GE) or AT&T Inc. (NYSE:T).

To circle back to my analogy, I couldn’t date someone who was both a certified genius and crazy attractive. And if I did, I’d probably be dating Bradley Cooper.

Fundamentals Can Be Delayed

Although the fundamental warnings shouldn’t be ignored, I’m not terribly worried about them. Sure, Tesla stock isn’t the stellar deal it was five years ago, or even one year ago. That doesn’t necessarily mean that TSLA shares are destined to collapse; it just may rise more steadily and patiently.

Moreover, we’ve seen this criticism before. Remember that for years on end, analysts mocked Amazon for running negative earnings. Yet these bears overlooked Bezos’s strategy: ring the cash register, drive up market share, and earn profits through the back-end of the retail-supply chain.

Amazon is the nerdy kid and Wall Street is the homecoming queen. Astute investors recognized the online retailer’s potential, and gave it a chance despite its then-shortcomings. Tesla stock is experiencing a similar dynamic. Believe me, if TSLA already had stable financials and disruptor capabilities, shares would be substantially higher than they are now.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2017/09/tesla-inc-tsla-stock-is-a-gamble-that-elon-musk-is-the-next-jeff-bezos/.

©2024 InvestorPlace Media, LLC