My view on what's going on in the financial markets and the global economy, and a few other things that might interest me from time to time.

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Tesla Again: Too Much, Too Fast (But Perhaps Too Soon)

Updated: Jul 19, 2020

I feel compelled to comment on my last blog post from Monday regarding Tesla, mainly because the shares have rallied further since I wrote it. As I mentioned in the prior post, there is a lot I like about the company, but I believed that the shares were well ahead of themselves at $451/share. Since then, the shares have soared to more than $497 before settling back today to close around $481, $30 higher than the start of the week! There are two explanations.

1. What do I know? I mean let’s face it – it’s hard to be so wrong so fast, so maybe the message is – if you read my blog (thanks!) and believe what I say, then do the opposite! OR

2. Give this more time, because the valuation of Tesla, regardless of the positive attributes of the company and its (hopefully) bright future, defies logic and simply make no sense. I believe strongly that momentum traders are taking the shares higher without the requisite underlying fundamentals to support the shares at this level. Look at this table and you decide.

Tesla has a higher market cap of its equity than any global automotive company aside from Toyota and VW, in spite of having the lowest revenues, smallest balance sheet (as measured by total assets), fewest units sold, and weakest credit ratings (proxy for access to capital in the debt markets) of the entire universe. This defies gravity, and I have little doubt will rectify itself in due course.

But I have been wrong so far, at least $30 / share wrong. Let’s see where this goes. (And I have had enough of Tesla for now!)

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