I’ll let you know right out of the gate this isn’t going to be a typical analysis of Tesla (NASDAQ:TSLA) stock. In recent months, the stock’s valuation has come completely detached from reality. If traditional analysis metrics don’t apply to a stock, I don’t feel it does much good to dwell on them.
Instead, I’d like to focus more on how Tesla stock became detached from reality in the first place. I believe it’s the same exact way many Americans felt the country became detached from reality when Donald Trump won the 2016 election.
I’ve said for years that Trump and Tesla CEO Elon Musk have nearly identical personalities. This story is not a hit piece on either. Regardless of how you feel about either man, Trump and Musk are both winners.
In fact, Trump’s fate in the 2020 election and beyond may actually give Tesla stock investors some insight into the future. How far will Musk be able to ride his cult of personality? It could tell investors whether or not TSLA stock enthusiasts may ever turn on or abandon Musk.
The Trump Playbook for Tesla Stock
Donald Trump is a businessman turned politician. Elon Musk is a businessman and entrepreneur. Both men have one true talent above all else: marketing.
Trump’s true genius is not in running profitable casinos or outperforming opponents using in-depth knowledge of political policy. He is good at understanding what his followers want to hear and then telling them just that. He’s good at imagining the type of person conservative Americans want to follow and then branding himself as that person.
Musk has done a similar thing. Tesla has never had a single full year of profitability as an auto company. It has gained only a fraction of the global auto market. But Musk knows what Tesla investors want to hear. They want to be a part of changing the world.
They aren’t “making America great again.” Instead they are “saving the planet from big oil.” Musk has branded himself as a real-life Tony Stark and an icon of geek culture. Some Tesla followers may not even realize that Musk does not have an engineering degree, even though he has said he is an engineer. It’s very reminiscent of how Trump said he was first in his class in college. It’s all branding.
There are entire websites dedicated to counting all the times Trump has lied Musk has his own similar lie tally as well.
Why Do People Still Follow?
It seems very strange to many Democrat voters why Trump still has so much support despite all his lies and questionable behavior. The same could be said of Musk and Tesla stock.
I believe the best answer to this question is a cognitive fallacy known as confirmation bias. Trump and Musk have done exceptional jobs of branding themselves as icons championing the causes that their followers are most passionate about. They are beacons of hope and representations of ideals. If TSLA stock investors see Musk as the personification of green energy and the savior of the human race, then they look for information confirming that idea and disregard all the rest.
That phenomenon is confirmation bias. Trump followers do the same thing. Somehow he is the candidate of choice for many American Christians despite his seeming lack of any clear Christian morals.
Confirmation bias is one of the reasons why actual cult followers will tolerate and even participate in horrendous behaviors like child abuse. Rather than taking an objective, rational inventory of what’s happening, they force the objective facts to fit their preconceptions about the cult leader.
Elon Musk paid a settlement to the Securities and Exchange Commission for fraud. Tesla has rarely hit financial targets. The company raises capital over and over and over again. But Tesla stock investors have excuses for all of these things. I’d bet if the CEO of Chevron (NYSE:CVX) paid a fraud settlement, TSLA investors wouldn’t be so forgiving.
Enemies and Excuses
A big part of the Trump playbook has been blaming his failures on his enemies. Rather than accept responsibility for mistakes, Trump typically personally attacks media members and other critics. Musk does the exact same thing, blaming the media repeatedly for negative stories that are often accurate or fair criticisms.
Musk has also repeatedly lashed out at the SEC simply for doing its job. He often openly taunts Tesla short sellers the same way Trump taunts anyone who criticizes his performance.
As I said in the beginning of this story, I didn’t write it to flame Trump or Musk. In fact, Trump proved this playbook works in 2016. Musk simply recognized that it works and followed Trump’s lead. And now in 2020, this playbook has put Trump in the White House and Tesla’s market cap at $281 billion.
Trump hasn’t changed his strategy in 2020. He’s still making promises he will likely never keep and telling his followers whatever he thinks they want to hear. Tesla and Musk are doing the same, claiming to have a million autonomous robotaxis on the road by the end of the year. Tesla also just got banned by German regulators for advertising “Autopilot inclusive” and “full potential for autonomous driving” when its vehicles have neither.
What Will It Take?
Musk and Trump have branded themselves as representations of what their followers wish they could be. The beauty in that branding is that any time they fail, any time they are attacked, their followers rush in with even more support. Many Tesla stock investors see buying stock as standing up for what they believe in rather than making a smart investment. It may very well be true that Trump could shoot someone in the middle of 5th Avenue in New York and not lose any support. Elon Musk fabricated a buyout offer at $420 per share and didn’t lose any.
The million dollar question for both Trump and Musk is how long does that level of blind support last and will it last forever? They are both tremendously savvy and extremely good at what they do. But then again, you could say the same thing about Charles Manson and Jim Jones. And their power and influence certainly didn’t last forever.
Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. Mr. Duggan is the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market. As of this writing, Wayne Duggan does not hold a position in any of the aforementioned securities.