I believe Tesla (NASDAQ:TSLA) is the most impressive stock we’ve seen over the past 18 months. Really, it’s one of the most impressive we’ve ever seen. And I’m not just saying that because I have been a longtime bull in Tesla stock either.
Admittedly, another electric vehicle (EV) stock has performed better over the last 12 to 18 months. But the overall trend in EV stocks is a positive for Tesla, as it helps to have your peers and industry rallying too. Furthermore, the size of Tesla makes it more impressive than anything else.
It’s still impressive when a $5 billion company turns into a $50 billion enterprise. But to see a company with a $65 billion market capitalization go an $800 billion market cap? Yeah, that’s stunning. That’s where Tesla was trading in March 2020 vs. where it’s trading now. If we go back to the summer of 2019 — a multi-year low for Tesla stock — the company’s market cap was roughly $31 billion.
The size of this move is simply jaw-dropping, there’s no other way to put it.
What Now With Tesla Stock?
We could sit here and beat on the bears all day long. I’m not going to do that, though. In a traditional world, the short thesis would have made sense against Tesla. But this unique situation made shorting a poor endeavor.
Is it true that Tesla was struggling financially in the summer of 2019? Yes. Building cars is expensive and difficult.
However, the one-dimensional thesis formed by short-sellers was not going to hold up to the onslaught of positives, No. 1 of which is CEO Elon Musk. Again, we’re going to avoid the drama discussion surrounding Musk and simply point out that he’s one of the most vocal, involved and charismatic CEOs in today’s world.
On top of that, he’s the company’s biggest shareholder and now the richest person in the world.
For investors, Musk’s wealth meter doesn’t matter that much, but it is relevant. If he were to begin selling his stake, it could create a selloff. But Musk has refrained from selling the company’s stock. Instead, he has opted to buy into secondary offerings and “become one” with other shareholders.
Psychologically, creating this camaraderie has been important with retail investors. On a more technical note, though, Musk’s massive position keeps a huge swath of stock out of the open market.
At last check, the man owns 193 million shares of Tesla stock. Can you even imagine? That’s almost four times more than the largest institutional owner and more than seven times the top mutual fund owner.
In fact, he owns roughly 77.5 million more shares than the top 10 largest mutual fund owners combined. And Musk owns more than the top five institutional owners combined.
That said, I’m only trying to illustrate what a huge chunk of stock is effectively off the open market — making Tesla stock so much easier to squeeze higher.
Don’t Be One-Dimensional
Bears made one huge mistake with Tesla stock: They assumed it was only an automaker.
They looked at the cars and said others make millions more per year, then they looked at the trailing financials and decided it was a short. Plain and simple. Putting aside some of their fanatical tales of Musk & Co., they didn’t consider the CEO’s massive stake. They didn’t take into consideration that Tesla would produce more than two or three different vehicles.
Now, we have an enterprise that is more of a tech company than an automaker.
Overall, Tesla is leading an EV and autonomous driving revolution. It’s clean-energy business is an entire business unit that some investors seem to be completely unaware of. I’m not just talking about solar roofs either, Tesla has a massive global opportunity with municipalities looking to go green.
With the stock’s second-half surge in 2020, the company has been able to raise more capital. Not only does that improve Tesla’s liquidity and financial fortitude — a key pillar in the bear case — but it allows Tesla to expand.
Look what happened after it got up and running in Shanghai. Now it’s pushing into Germany and Texas with more production facilities. These are not catalysts for today, they are the catalysts that will steer the ship in the long run.
The Bottom Line on TSLA Stock
Clearly I have been and remain a big bull on Tesla stock. However, that doesn’t mean the stock can’t or shouldn’t pull back.
Some investors wrongly assume that pullbacks are unhealthy and that wanting one is bearish. That is simply not the case. What we don’t want is a repeat of 2000’s price action, where everything rallies uncontrollably before bursting and imploding lower.
To prevent that type of action, we need corrections. For Tesla stock, we saw such a correction in early September right after the stock split, followed by a couple of months of consolidation. That was so healthy!
Now up 70% from the breakout over $500 and another pullback and consolidation phase would be reasonable at some point. When we get it, use it to your advantage. Because it’s easier and better to buy during a calm basing than a raging rally.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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