Why Tesla Stock Investors Have Finally Accepted the Company’s Quirks

TSLA stock is no longer reacting to Musk's tweets or turnover In personnel

Tesla (NASDAQ:TSLA) continues to make the news for many of the wrong reasons. The provocative tweets from CEO Elon Musk continue. Also, seeing the general counsel leave the company after a short stint will not exactly endear buyers to Tesla stock.

However, in a surprise, these incidents drew little reaction from TSLA stock investors. This non-response marks a turning point in Tesla. Now, investors will evaluate TSLA more on its results, not words or personnel moves. Fortunately for the bulls, these posted results point to likely growth for Tesla stock.

Tesla Still Exhibits Signs of Chaos

Tesla has seen a chaotic Presidents Day week. Word came down that Dane Butswinkas, the man who served as the firm’s general counsel, announced his departure after just two months on the job.

Why Tesla Stock Investors Have Finally Accepted the Company's Quirks
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Also, Mr. Musk tweeted that the company would build “around 500,000” vehicles in 2019. He then clarified that they could make 500,000 per year at about 10,000 cars per week. However, production estimates remain at 400,000.

Such posts on Twitter (NYSE:TWTR) call into question the effectiveness of the settlement reached with the SEC. Part of that agreement involved reigning in Mr. Musk’s tweets. Issuing and reversing guidance in a random social media post would probably qualify as a violation.

Tesla Stock Has Stopped Reacting to the Turmoil

However, I think investors should also take notice of the reaction, or rather, the non-reaction of Tesla stock. In most equities, such news would inspire panic selling. However, in Tesla, it now creates barely a ripple as the stock has seen only a little movement.

I said in an article months ago that Tesla trades on a “vision premium.” I define this as the elevated multiple investors will pay for a new company offering a product or service that will bring fundamental change. Seeing this news, we become reminded that with vision sometimes comes eccentric behavior. The company’s namesake, Nikola Tesla, was also a creative genius who sometimes exhibited quirky behavior. More recently, the same went for Steve Jobs at Apple (NASDAQ:AAPL). In the case of Tesla stock, we can assume that investors know that Mr. Musk exhibits some of these traits and have come to accept it.

Now, One Can Judge Tesla By Its Results

Reaching this point means a lot to investors. For some bulls, it dashes the hopes that an errant tweet will bring a buying opportunity in TSLA stock. However, it also means that we can evaluate Tesla stock based on financial metrics and the popularity of Tesla’s cars and solar products. There, I like what I see.

Turning a profit has dramatically improved the outlook on Tesla stock. I did not like the idea of paying over $300 per share two years ago when analysts did not see a profit in the foreseeable future. However, predicted earnings of $5.49 per share for the year make a $300 per share price more palatable.

Profit growth offers further help. Analysts project 512.8% growth for this year. Although that growth rate will not hold, they still predict a 67.4% profit increase in 2020. They also forecast an average growth rate of 35% per year over the next five years. Prospective buyers can purchase this growth at a forward price-to-earnings (P/E) ratio of 32.9. For a company that can change the way we power our future, I see this as a huge bargain.

The Bottom Line on Tesla Stock

Now that Tesla stock has become more results-driven, investors should look at the massive growth rate coupled with a relatively low P/E ratio and buy. In many respects, little has changed inside Tesla. The company continues to see turmoil within top management. Also, the company’s eccentric CEO continues to exhibit unnerving behavior on social media.

Yet, amid the chaos, Mr. Musk’s creative genius and drive to succeed has turned Tesla stock into something I never expected — a bargain. For a forward P/E at just under 33, investors will enjoy triple-digit growth this year, and massive double-digit earnings increases for years to come. On top of that, they will own a piece of the company that will probably change the way we power our world. Thanks to this change in attitude, Tesla stock now brings the benefits of visionary growth without the consequences of the odd behavior that sometimes accompanies that genius.

As of this writing, Will Healy did not hold a position in any of the aforementioned securities. You can follow Will on Twitter at @HealyWriting.

 


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