Tesla’s (TSLA) shares have climbed from about $80/share at year end 2019 to almost $700/share.
Buoyed by its inclusion in the S&P Index, the company’s market capitalization is now over $650 billion – representing possibly the biggest single large cap bubble in history.
“Noted competition will include the Audi Q4 e-tron and Q4 e-tron Sportback, BMW iX3 (in Europe & China), Mercedes EQB, Volvo XC40, Volkswagen ID.4 and Nissan Ariya, while less expensive and available now are the excellent all-electric Hyundai Kona and Kia Niro, extremely well reviewed small crossovers with an EPA range of 258 miles for the Hyundai and 238 miles for the Kia, at prices of under $30,000 inclusive of the $7500 U.S. tax credit. Meanwhile, the Model 3 now has terrific direct “sedan competition” from Volvo’s beautiful new Polestar 2 and the premium version of Volkswagen’s ID.3, and next year from the BMW i4.”
– Mark Spiegel
As noted above, faced with an onslaught of competition – by Audi, Volkswagen (VLKAF) and others – and a relatively shallow moat, Tesla’s market capitalization is now over 5x that of Ford (F) , General Motors (GM) , and Fiat Chrysler (FCAU) , which, as a group, sell 17 million units/year vs. Tesla’s estimated production of 500k cars in 2020.
Tesla’s has little proprietary in terms of electric car technology – while its global competitors have over a century of experience of consistent manufacturing and distribution of high-quality automobiles, and which subsidize ongoing operating losses from their electric car efforts.
Tesla has been in existence for 17 years and, adjusted for the sale of emission credits, has never been profitable despite having no competition, and no need for advertising.
Despite limited world-wide competition, Tesla has propped growth by cutting unit prices. What happens when the well reviewed competition gears up for delivery in 2021? Market share will be pressured and operating margins will decline.
Meanwhile, management turmoil has intensified over the last two years.
Bottom Line
In an era of cultism, Tesla is the stock (and Bitcoin is the currency)!
(Ford is a holding in Jim Cramer’s Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells F? Learn more now.)
Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.