Analyst: Tesla Is a Gamble, Not An Investment

From Tony Sagami: On Monday, Tesla Inc (TSLA) reported stronger-than-expected sales of its Model S and Model X cars and its stock shot up by almost 7% to a new all-time high.

That surge pushed Tesla’s market cap to $48 billion, above the $45 billion value of Ford. Yup, Wall Street thinks Tesla is worth more than Ford.

Tesla’s stock added another $5 on Tuesday and pushed past General Motors to be the most valuable automaker in America.

How does Tesla compare to Ford and General Motors in sales? In the first quarter of 2017, Tesla sold 25,000 cars. Ford and General Motors sold 617,000 and 690,000 automobiles respectively.

By the way, Ford pays a $0.60 (5.1%) annual dividend while General Motors pays $1.52 (4.3%) a year.

Yup, Tesla sold just 25,000 cars. More importantly, sales of Tesla’s most popular model, the Model S, are slowing down instead of increasing. My guess is that most wealthy, environmentally sensitive, status-conscious people have already bought an electric car.

The flattening sales trend is about to get worse. Starting in 2012, Tesla offered buyers unlimited, free, lifetime charging. However, Tesla discovered that its buyers were gorging themselves at its free charging stations instead of plugging in at home.

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This January, Tesla stopped offering free unlimited charging. Instead, it offers 400 kWh a year, which translates into about 1,000 miles of driving.

Of course, there is more to Tesla than just cars. Tesla has big ambitions for its battery, solar panel, and space exploration divisions.

But those ambitious dreams are a big reason why Tesla has yet to turn a profit and why it has, in fact, lost $2 billion in 2016. Yes … a $2 billion loss in a single year.

And Tesla’s books show a whopping $8.59 billion in debts, or $44.25 per share of IOUs. In fact, that debt load just got heavier; Tesla sold $850 million worth of bonds in March.

By the way, while Tesla was busy passing General Motors, the auto industry reported its March sales on Tuesday … and they were disappointing.

Americans bought 1.56 million new cars and trucks in March, a 1.6% year-over-year decline, led by big drops at Ford and Fiat Chrysler.

March “was a tough, tough, tough market,” said Judy Wheeler of Nissan.

The Wall Street crowd was wrong again. They expected dealers to sell 1.62 million new cars and trucks in March, a 2.2% increase.

I am not suggesting that you dump your Tesla shares tomorrow morning. But the struggles of the automakers combined with Tesla’s extreme valuation should trigger some alarm bells. Moreover, if you really want to invest in the electric-vehicle market, there are several ways to do so sanely. For example, …

  • This may shock you, but Tesla isn’t the biggest electric-vehicle seller in 2016. It is BYD Auto Co. Ltd., a wholly owned subsidiary of BYD Co. Ltd. (BYDDY). Warren Buffett, by the way, has a significant investment in BYD.
  • Instead of investing in the automakers, consider putting your money into battery manufacturers, such as LG Chem Ltd. (LGCLF), Samsung SDI Co. Ltd. (SSDIY), or Foxconn Technology Co. Ltd. (FXCOF).
  • And if you really want to get basic, consider lithium producers; Albemarle Corp. (ALB), Sociedad Quimica y Minera de Chile SA (SQM), or FMC Corp. (FMC).

The momentum behind Tesla is so strong that I suspect it can go even higher. But it is a stock for gamblers who make a living by investing other people’s money.

Tesla Inc (NASDAQ:TSLA) rose $0.15 (+0.05%) in premarket trading Friday. Year-to-date, TSLA has gained 39.78%, versus a 5.33% rise in the benchmark S&P 500 index during the same period.


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