Is TSLA Overrated?

Tesla Motors Inc. has been bullish for the past 4 weeks, going from around $140 per share in early February linearly pulling up to $232.20 by last Friday. So what gives? Is TSLA a worthy investment, should your buy into TSLA now? A big debate all around. Many investors believe that Tesla Motors is highly overrated, running on nothing buy hype. Fans appear to be driven by the notion of growth, believing that the world will go green. This contributes highly to the reason that the Tesla Motors stock is worth 50% more than say EA, and the latter has no debt and is profitable. Fanboys will scream: “but TSLA has a 50% year-over-year growth potential”. Does it?

What can go wrong?

Elon Musk dies

If morbid reality has taught us anything at all it’s that everybody dies. Accidents are waiting to happen. Most obviously, and irrefutably, the TSLA stock value has the whole Elon Musk craze factored in. What happens if Musk dies? TSLA will likely plummet, since a large portion of the value is contingent on him being around. If Musk dies – TSLA is sure to follow. He’s the one keeping the fire burning, the company afloat, investors interested. The products Tesla Motors Inc. is putting on the market are not overly better than other companies and startups out there are doing. Electric cars becoming more popular, storage batteries being batteries, there’s not much of an edge.

No cash left

Tesla is burning cash at a very rapid rate. What happens if there’s none left. This is already a concern, since they’ve already burnt through $4 billion throughout 2014 and 2015. Net loss in Q4 2015 amounted to a staggering $2.44 per share. If the situation doesn’t improve fast this year Musk will have to print dollar bills. Investors will eventually get tired. Their last post-IPO investment was a mere $10 million by the California Energy Commission. Elon Musk works harder than anyone on the planet right now, probably, but he’ll have to work even harder.

Broken promises

Musk promised that 2016 will be the year that Tesla Motors will become profitable. And it does appear that that can happen. TSLA is currently $2.7 billion in debt. However, their debt-to-asset percentage hasn’t quite hit its all-time low of around 25% (back in 2013). Moreover, 2015 was their worst year ever. Some say that R&D costs are setting them back, yet, other companies in the same business are getting more returns from R&D than Tesla, although it’s difficult to compare young TSLA with established giants of the industry. Guess we’ll see how things turn out in Q1 2016 Earnings Release on May 4th.

So, what do you think? Sell? Buy? Hold?

Photo credit: @cchana