Tesla’s ($TSLA) Stock Tells us the Stock Market is in a Bubble
I’m just going to say it, Tesla’s stock is overvalued AF. In a stock market where Tesla is valued as a technology company more than an automobile company it’s the biggest fraud of its ilk I’ve ever seen: $TLSA $NKLA $NIO $IDEX $SOLO $BLNK. The stock market in early July, 2020 is hitting such fantastical valuations that Tesla’s run is looking nearly like a fraud.
Tesla shares have outperformed other major tech and auto stocks since it went public exactly 10 years ago. Sure, it’s up over 4000%. Still there’s the momentum to invest in speculative unprofitable companies, which is still worrisome for a stock market rigged by the Fed.
When Tesla recently hit a new all-time high of $1,135, it gave the company a valuation of roughly $206.5 billion, compared with Toyota’s valuation of about $202 billion. More valuable than Toyota, eh? America won’t even be the leader in technology that much longer.
Tesla’s stock is actually $1,208 at the time of writing. The stock hit a low of $361 on March 18th, in the Coronavirus crash of 2020’s first wave. Just one year ago it was $233. That’s not a normal valuation by any stretch of the imagination.
Shares have rallied this year since the company’s new factory in China came online. China being the operative word. Tesla will, like Apple, be allowed to benefit in China for a few more years. However Tesla’s share of the EV market will only decline over time. Its autonomous car innovation is very much in doubt. It’s affordability is also highly questionable for mainstream drivers.
More valuable than Toyota? Give me a break. The milestone underscores the vast investor enthusiasm for Elon Musk’s automaker, which has yet to turn a profit on an annual basis. Elon Musk is a good salesman and promoter, but even after 10 years IPO, the product is stumbling out of the blocks.
While Tesla may have exceeded Toyota on market value, it lags the Japan-based company by a wide margin on actual car production. The stock market is not an accurate reflection of the world or economic data as it has been juiced by the Fed, propped up by central banks everywhere who are manipulating debt as if money grew on trees. A debt crisis is coming in 2021.
Tesla’s stock trades at more than 300 times full-year earnings and isn’t supported by the underlying fundamentals. The true value of the stock is likely well below $400. Tesla went public ten years ago today, pricing shares at $17, higher than its expected range of $14 to $16.
The company raised around $226 million in its IPO, with shares surging that day by around 41% to close at $23.89. That Musk has fooled the markets doesn’t make him a genius, it makes him look like a fraud.
While Tesla is an innovation story, it’s also a stockmarket hack story, let’s be honest. Tesla announced that it delivered 90,650 vehicles during the quarter, better than the 74,130 vehicles that analysts who cover the company were forecasting. This isn’t rocket science. There’s optimism and then there’s overheated speculation.
Elon Musk is also getting full of himself. Taunting the SEC? He’s becoming a bit old school in his exceptionalism. The chief executive officer first taunted short sellers in a string of tweets, writing that the electric-car maker would “make fabulous short shorts in radiant red satin with gold trim.”
Musk, 49, has done a better job with SpaceX than problem-plagued Tesla, to tell you the truth, he has learned a thing or two. In December 2018, Musk told “60 Minutes” that he did not respect the SEC. His use of Twitter has been highly problematic where he has 36.5 million followers. Then he was cloned by Nikola Motors, a SPAC that is even more ludicrous.
Shares in Tesla have surged since the start of 2020 as investors have begun to feel more confident about the future of electric vehicles. With a Fed propped stock market in 2020, anything goes, so why not pump Tesla, right? This will be one of the most volatile stocks in the history of the 21st century. Tesla hasn’t achieved victory, it’s achieved brand fraud to become the “Apple” of the future of the smart car.
The EV stock sector is a bit like what we saw with cannabis stocks a few years ago: it’s all the rage but when it cools it will be brutal. This is because in the EV sector it’s so competitive there will be many winners and Tesla won’t be able to logically compete for long as the first mover in the EV or the autonomous vehicle space. Tesla is the red vroom startup that could, but it isn’t the future of the smart car, it’s just the beginning of a new twist.
Sorry, Japan, you know. Toyota sold 8,958,423 cars worldwide last year. That’s almost 25 times the 367,500 cars Tesla said it cranked out in 2019. But Wall Street investors have decided Tesla is the better stock to buy. Tesla is a gimmick, so don’t buy into its related stocks that pretend to be something they are not.
The EV (hydrogen) sector has a long line of such stocks including $NKLA, $NIO, $IDEX, $SOLO, $BLNK, all immensely overvalued today. We have to take this inflated stockmarket with a grain of salt. The Fed has miscalculated badly in over-reaching with liquidity, dooming us to a debt crisis that will make March 2020 look like a party.