Tesla is a cult of personality
Need proof? Just look at the stock
Have you ever thought about doing something for so long, grappling between the pros and cons like a dog chasing its tail, that you simply give up on the idea altogether?
One day you love it. The next, not so much. Like you have two contrasting versions of yourself playing a game of tug of war between your ears.
For me, that’s exactly how the decision to invest in Tesla has played out over the course of the last few years. Long story short, I never pulled the trigger.
Electric vehicles are the future
At some point in the next couple of decades, EVs will outnumber their gas-powered counterparts and Tesla, an undisputed leader in the industry, is in the driver’s seat to capitalize on the world’s gradual shift to sustainable energy.
Elon Musk and Co., thanks in large part to a massive first-mover advantage, sell three of every four EVs on the road today.
There are a lot of reasons to like Tesla.
But, the competition is coming for Tesla
That 75% market share isn’t going to last forever. Ford and General Motors are rapidly scaling up their EV manufacturing, Rivian has shown an ability to hit its shipment goals and, well, pretty much every other major vehicle manufacturer in the world is ramping up EV production as I type.
So, what’s keeping Tesla hovering just below $700 despite a price-to-earnings ratio of nearly 100?
Hint: Rhymes with Tusk.
People are investing in Musk, not Tesla
The verdict’s still out on just how brilliant Musk is. He’s certainly made some interesting decisions in the last few months, including flip-flopping all over the place in his quest to buy Twitter.
He is the richest man in the world, though, so he’s clearly doing something right. I’m not writing this post to criticize Musk or his decisions. I agree with some of what he has to say, mostly related to the EV stuff (not the space and crypto stuff), but, love him or hate him, he clearly has an influence on equity prices.
Bitcoin’s value jumped more than 20% to $38,566 after Musk changed his personal Twitter bio to #bitcoin back in January of 2021.
It happened again when he said consumers would be able to make their Tesla purchases with Bitcoin, then fell when he backtracked.
Interestingly enough, Tesla still has more Bitcoin on its balance sheet than almost any other publicly-traded company and, I don’t know if you’ve noticed or not, but it’s worth considerably less than it was a year ago.
Oddly enough, Tesla investors just don’t care. With Musk at the helm, there’s nothing to worry about, right?
Want more proof? Look at the stock
I’ve been convinced Tesla is a cult of personality for a while. The way the stock has held up despite an array of negative news just cements that conviction.
Tesla’s quarterly deliveries fell for the first time in over two years as it delivered 254,695 cars during the quarter that ended in June. It was fewer than expected and down by almost 60,000 from the previous quarter.
The slowdown had a lot to do with China’s Covid crackdown and problems with ramping up production at its brand-new factories in Germany and Texas, things that will ultimately work themselves out, but didn’t the market just absolutely demolish another company for posting a decline of its own?
If you’re thinking of Netflix, we’re on the same page. In the first quarter, the streamer, analogous to Tesla in that it’s a first-mover and disruptor in its own industry, reported losing 200,000 subscribers. It marked the first time it lost subscribers in more than 10 years.
So, what happened after the announcements?
Tesla stock dipped about 2% the day it made its decline public. It’s down 36% over the course of the last three months, but still just barely positive compared to its share price at this time last year.
Netflix, on the other hand — the proud owner of a shockingly low 16.87 price-to-earnings ratio — is down 51% in the last three months and 65% in the last year.
Both companies attract the same type of investor, people who casually shrug off the high multiples in favor of the growth story. Both stories, at least in terms of growth, are hitting lulls. Both stocks, though, aren’t fairing the same.
Maybe Netflix just needs an Elon Musk of its own.
Disclaimer: I’m a market participant, not an analyst. This is not financial advice.
