Tesla Bears Should Just Give Up
InvestorPlace - Stock Market News, Stock Advice & Trading Tips Tesla's rise to over $1 trillion is driven by bears who continue to sell it short. Once everyone is a...
It seems impossible, but Tesla shares are up just over 70% in three months. While it now has roughly half the entire auto industry’s market capitalization, Tesla still has little market share. In the U.S. and Canada, Tesla’s share of the total car market is just 2%.
Despite this, a “Tesla Effect” is boosting all car stocks. General Motors (NYSE:GM) is up by one-third this year. Ford Motor (NYSE:F) has more than doubled. Sales of electric cars may nearly double this year. But Tesla’s hold on that market may be slipping.
Just don’t tell anyone.
Tesla is Overvalued
During the third quarter, Tesla earned $2.1 billion, $1.86 per share, on revenue of $13.76 billion, using non-GAAP accounting. This puts total revenue for the first nine months of 2021 at $36.1 billion. Total revenue for TSLA stock in 2021 could top $50 billion.
This still means investors are paying over 24 times revenue for what is basically a car company. Tesla has announced improved roof tiles, and the revenue a Tesla generates over its lifetime dwarfs its initial price. But it’s still a car company.
The latest news keeping TSLA stock hot is Hertz Global (OTCMKTS:HTZZ) deciding to buy 100,000 Teslas, half of them to be rented by Uber Technologies (NYSE:UBER) drivers. That order alone is worth $4.2 billion.
Tesla is even winning in the world’s most competitive electric auto market, China. China now represents nearly one-third of Tesla sales, over $3.1 billion. In the third quarter alone, 56,000 cars just in September were sold. Tesla opened its Gigafactory in Shanghai in early 2020.
The Posse Keeps Coming for TSLA Stock
Electric car rivals are now scaling production as Tesla did in 2018, and investors are loving it.
Lucid Group (NASDAQ:LCID), which just delivered its first cars, is now worth $56.8 billion. Rivian, backed by a van order and equity from Amazon.Com (NASDAQ:AMZN) and Ford, will soon IPO at $55 billion.
There’s also some bad Tesla news to report, not that anyone is listening. Tesla had to recall 11,704 cars over a problem with its self-driving software. Its charging network, a key differentiator, is being opened to other brands, at least in the Netherlands. A jury awarded a former worker $137 million in a racial discrimination lawsuit.
But, again, no one is listening. Tesla is a phenomenon that keeps going up “on nothing,” says TV analyst Jim Cramer. Veteran analyst Dan Ivan says of Tesla bears, “they hated at $100. They hate it at $5500,” as one Tesla critic managed to block seven Tesla Superchargers at once recently outside a McDonald’s (NYSE:MCD). The stock went up on the news.
The Bottom Line
Famed auto analyst (and former comedian) Jay Leno has compared Musk to Henry Ford. He’s not wrong.
The rise in Tesla shares is literally sending Musk to the Moon. His SpaceX is worth $200 billion and could power his fortune to over $1 trillion.
Nothing goes up forever. If the Tesla bears just gave up, and those shorting the stock just stopped, Tesla’s value would fall. Manufacturers aren’t worth 23 times revenue. Not on this planet. But who said Tesla, or Musk, planned to stay on this planet?
Enjoy the run in Tesla stock. Just remember that when everyone is on board, there’s nowhere to go but down. The law of gravity has not been repealed.
On the date of publication, Dana Blankenhorn held a long position in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. Just in time for Halloween he has a collection of COVID-19 stories at the Amazon Kindle store. Write him at email@example.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.
More From InvestorPlace
- Stock Prodigy Who Found NIO at $2… Says Buy THIS Now
- Analyst Who Found Microsoft at $0.38 Names #1 Pick for the AI Boom
- America’s #1 EV Stock Still Flying Under the Radar