Tesla – Great Cars, Perhaps Great Company But Very Scary Stock

Tesla (TSLA) makes great automobiles, and although that is not all that they do, the Tesla automobile generates most of their revenues. That may not always be the case, but it is today. According to Zacks Investment Research, Tesla’s automotive segment generated 93.7% of 2019 revenues. Moreover, Tesla commands approximately 60% market share of all electrical vehicles in the United States.

The company’s second segment, energy generation, and storage made up a mere 6.3% of Tesla’s total sales. Drilling down a little further, Zacks also reports that the company’s flagship Model 3 accounts for about half of Tesla’s electric vehicle market. However, the company currently produces and sells 3 fully electric vehicles. The flagship Model 3 sedan, Model X sport utility vehicle (SUV), and the Model S sedan. The company has also previewed a future product lineup which includes the Model Y, Cyber Truck, Semi Truck, and Roadster.

In addition to their automobiles, Tesla also makes different kinds of technology such as self-driving software (already included in some EV models), charging stations, and battery development. Additionally, the company is operating a growing business in solar and energy storage.

In summary, Tesla is clearly defining the electric vehicle market in the United States. But not only are Tesla automobiles green, I would also say they are flat out fun. Although I am not yet ready to invest in a new car, I did have the occasion to test drive the Model S last week. Frankly, before I go on, I must admit to one of my most ardent vices – fast cars. However, the Tesla Model S has completely redefined what the words “fast car” means.

There is no car that I have ever driven or ridden in that even compares to the acceleration of a Tesla Model S. The car goes from 0 to 60 mph in a stunning 2.3 seconds. Words like exhilaration do not even begin to describe what that feels like. In summary, the Tesla Model S is so scary fast that it almost made me blackout. Handling was also an out of this world experience. According to the Tesla salesman, it is impossible to flip a Tesla Model S. I do not know if that is true or not, but I can tell you the car felt incredibly stable. Candidly, the Model S’s handling was orders of magnitude beyond the performance of my BMW, which I have always considered an awesome handling automobile. Simply stated, the Tesla Model S puts it to shame.

Tesla Great Company Scary Stock

As a result of my recent experience with the Tesla Model S shared above, it has become very easy for me to see why so many people are so exuberantly enthusiastic about Tesla’s stock. But, although there is much to love about their automobiles, and even the recent progress the company has made regarding profitability, the current price of their common stock is frankly insane. And I am not the only one that thinks so.

A recent headline on Seeking Alpha stated: “J.P. Morgan doubles down on bearish Tesla thesis.” To quote analyst Ryan Brinkman: “Tesla shares are in our view and by virtually every conventional metric not only overvalued but dramatically so.” Also, J.P. Morgan did lift their target price to $90 from $80 per share. However, that represents an 86% downside from the current price. I agree with J.P. Morgan, and what follows is a review of Tesla’s valuation based on – as J.P. Morgan put it – several conventional metrics.

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Disclosure: No position.

Disclaimer: The opinions in this article are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks ...

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