frugal

My take on Tesla stock (TSLA)

This article will give you a summary of my opinions on Tesla’s stock price. As of the time of writing, it has a price of approximately 805 USD. Within the past year, the stock price has skyrocketed by about 4 times and its price has been attracting a lot of attention. As a young person, I see Elon Musk as someone we should admire in our generation.

Elon Musk defies stay-home order to reopen Tesla and asks to be ...

I will break down this article into three big sections, which would be my personal opinions on the company and the CEO himself, Elon Musk. After that, I will go into some fundamental analysis and technical analysis of the stock price itself. I will end off with my personal thoughts and whether I think it is a steal or not for a low-capital investor like me who is just starting out.

Personal Opinions on Tesla Stock

Firstly, I am a huge fan of Elon Musk. He is such a genuine person and his work ethic is crazy. His conversations with Joe Rogan and Jack Ma just showcases his personality and how he thinks of technology as a whole.

I believe he genuinely wants to help humanity. He is the founder of many large companies that have become the household names of the industry. Elon disrupts the industry and wants to push humanity forward.

Elon has said it multiple times, his ultimate goal is to bring humanity to Mars by making space travel affordable. One way of doing so is to make them reusable so as to cut costs.

Tesla: the iPhone of electric vehicles or just another car company ...

Elon created Tesla to help the environment. Electric cars are way more environmentally friendly than your traditional ICE cars, and he knows that. But the automaker industry is so difficult to break into and disrupt. Look at the large household names like Toyota, Audi, BMW or Mercedes. These are brands that people have been hearing for ages. They have massive fleets of cars and are ready to crush any small company trying to take market share away from them. However, Elon Musk is different.

He makes use of innovation. And that is what makes this TSLA stock special.

Innovation

Tesla is one of the most innovative companies out there and it is not just an automaker firm. Tesla is an energy company and they showcase their battery making capabilities through their electric car. Their plan is to make renewable batteries (those found in their cars) cheap and affordable so that people can afford them. This is why Teslas are priced pretty reasonably in the US.

Not only that, but they are also a technology company. They are implementing increasingly complex artificial intelligence in their cars. Moreover, their cars come with the same software module. This means that they can be easily updated or upgraded by the owner.

This is innovation. They are disrupting the industry. No car company is as technology savvy as them.

With this innovation, I foresee TSLA to continue to climb in their stock prices. If this continues and Elon continues innovating as he has promised, he will deliver. Stock prices will definitely exceed 1000 USD in 3 years time. If I am optimistic, I would say that in 5 years time, it can even reach 2000 USD.

This is because governments are realising the impact of traditional ICE cars. They are shifting towards electric cars (although Singapore is still slow due to its small market size). And Tesla is at the forefront of other electric cars. It makes sense. 

Volatility

But the stock price is very volatile now right? Should I really buy it now? I cannot answer the second question because I cannot predict the future. But for the first question, yes the stock price is very volatile.

This is because Tesla is heavily tied to its CEO, Elon Musk. Whatever he does, it will affect the stock price. When he smoked weed on the Joe Rogan show, Tesla stock price plummeted. But it recovered significantly since then. This shows the indifference of Elon Musk. He does not care what other people think of him. Elon is a problem solver and an engineer at heart.

He never fails to deliver, even though it may not be on time sometimes. Just look at the attention he garnered from giving his baby a weird name. He is not just your typical CEO that sits back in the office. No, he is hands-on. He goes to his factories to check on his cars and work on them. His mind is filled with ideas all the time. He may not be the most eloquent speaker, but that is okay. He lets his intellect and desire to help humanity to shine.

Any stock is volatile. Why would it not be? The stock market is not a reflection of the economy. Just look at how the stock markets are rallying even though the world is still suffering from the COVID-19 pandemic. The stock market is merely a collection of investors’ emotions. Just like emotions, the stock market will remain volatile.

So ignore your emotions, look at what is rational.

Thoughts on Tesla Stock

No investment moat has shown to reliably prove that companies will continue performing well. Just look at how the crises have exposed weak firms and gave stronger firms the opportunity to further innovate and gain the upper hand.

In 2008, Lehman Brothers filed for bankruptcy. Who would have thought that a large investment firm would suffer so badly.

Closer to home, we can take a look at Hyflux. The $670 million dollars that Singaporean moms and dads placed in this company have all gone to nothing.

Hyflux creditors to file proofs of claim by new March 11 deadline ...
Collapse of Hyflux

These two examples showcase the importance of managing their financials despite being seemingly stable by the general public. There is no guarantee which company will fall next. Look at how Airbnb has suffered because of this crisis, having to lay off the bulk of their workers.

However, I believe that Tesla has strong financials and their innovation will supercharge their growth. (haha get it?)


Fundamental Analysis
of Tesla Stock

Look at Q1 of 2020. The majority of the economy has faced a drop in demand, but Tesla has received a surge in demands. More than they can handle. Although it is a good thing that they have high demand, the inability to manufacture and efficiently scale the process of making the cars has made cautious investors shun it.

Currently, Morningstar rates Tesla 3 stars out of 5, which is reasonable for most investors. This is because of the volatility of the market right now as well as the sudden surge in the price of Tesla stock recently.

Business Model

I feel like the business model of Tesla is very simple but not easy to understand, which is why some people misunderstand it.

“Tesla Motors was created to accelerate the advent of sustainable transport.”

Elon Musk is so confident of his business that he decided to take down all Tesla patents a few years back. He wants humanity to benefit from his technology. Although what goes through his mind can be quite quirky (look at his tweets), he is a genuine man and wants to move the world forward, a generational genius.

Right now, Tesla is at the forefront of sustainable transport. Although their profit margins remain low, they still are able to turn profitable in recent years, and most impressively in Q1 of 2020.

Competitive Advantage

This is a feature that many people miss out. Look at Coca Cola, they have a brand name for soda. Look at Microsoft, they have a brand name for the operating system and software. 

Tesla has a brand name for sustainable transport. Look at other automaker firms, their brand image has been deeply rooted in the traditional automobile industry. They do not stand out.

Tesla has been refusing to pay shareholders dividends. They have been reinvesting all their revenue into building their gigafactory to scale up their production.

Look at Apple, once Tim Cook took over, he began to succumb to the pressure of stockholders. Apple began paying dividends. For an insanely profitable company such as Apple to do so, it would be safe to say that they are lacking innovation. They are no longer as innovative as they were in the past when Steve Jobs was the CEO.

Steve Jobs single-handedly revolutionalised the mobile technology industry. Macs and iPhones have been seeing incremental updates since then. They have not dared to try out something new. They have just been seeking additional sources of revenue by removing the headphone jack and creating the Airpods (albeit being a great product). Although it is undeniable that Apple products are very well engineered and they are all very well thought out, they are no longer as innovative as before. It is almost as if they want to establish a premium image to their brand instead of letting their products do the talking. Just look at the high price tags of their products.

P/E ratio

TSLA has a negative P/E ratio. Although that can be seen to be a bad sign for most businesses, this is because TSLA has been reinvesting its revenue to constantly innovate. They only became profitable very recently. The self-driving capabilities, as well as their well-built cars, are just second to none.

Overall, Tesla has been managing their financials well. Look at this tweet.

VW has about $211B in long term debt. Toyota has about $185B in long term debt. Ford has about $154B in long term debt. GM has about $100B + unpaid bailout loan of $14B. Daimler $106B in debt. BMW $127B in debt. Tsla only has $13B in long term debt.

@MontanaSeptic

Tesla’s $13 billion of debt is considered chump change compared to other automakers.

They have great management too, look at their CEO. I explained it above.

Technical Analysis of Tesla Stock

Looking at this chart that I have made, I have drew some support lines as well as some signals shown in the TSLA stock chart.

The thick pink line shows TSLA’s main support line. I believe that that is the price that it will always rebound from. 

In the past two months, the stock has shown a W formation (orange line), indicating a bullish signal. This is then followed by a wedge (green line).

At that point, it was difficult to determine whether the stock price would burst upward or downward. It is a 50/50 chance.

Given the burst out of the wedge to be an upward trend, it was followed by a sideways trade. 

I believe that it has formed another mini-support line (yellow line). Even more recently, I would say another mini support line (blue line) is formed. Although technical analysis may be very inaccurate and it is impossible to predict stock prices, I foresee Tesla stocks continue trading sideways for the next week or so. (fluctuating around 800 USD)

Unless anything major comes up, like Tesla becomes part of the S&P500 or Elon Musk names his second baby some weird name again, I think Tesla will trade sideways for now at least until their gigafactory in China can scale up its production to its predicated rate.

Conclusion

Congratulations on reading through my analysis of the Tesla stock. As you can see I am very optimistic about the stock and I am definitely biased because I am a human and I am a fan of Elon himself. However, it is what I personally see in this stock.

Personally, I am just an NSF. My capital is not high. My net worth is not high. The price of this stock is just too high for me to invest into it. I will continue keeping watch on this stock as I see it potentially climbing even higher in the future. Even if I were to invest, I could probably only buy a few lots, which will not amount to a significant profit.

I think I would have better luck elsewhere. But to all the people reading who have a higher capital than me, this is a good growth stock. If you are willing to stomach the risks and turbulence of this stock, it will serve you well. At least in the next 5 – 10 years. Buy and hold.

Disclaimer: Do your Own Research

My content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on our Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise.

Leave a Reply

Your email address will not be published. Required fields are marked *