4. November 2019 by Zachary Shahan
As you may have seen, Tesla recently posted a quarterly profit, which apparently shocked the market enough that the Tesla [TSLA] stock price was shot up. I do not follow the stock closely, but I am a shareholder and think the whole debate about "Tesla bull vs Tesla short" is quite fascinating. I've had several thoughts on the stock and these different investment communities over the past week, but the one that shot ahead and fastest was simple: TSLA bulls warned the TSLA shorts.
I began to think about what exactly it means how we Tesla bulls warned Tesla shorts. I realized that it was extensive – not just one point or another, but an even debunking of the concerns and pessimistic claims. Not only has there been one warning, but many different warnings packed together on a daily basis. The combined takeaway alert was just that, yes, Tesla can make money. There is no bankruptcy. Stop betting it will crash before you get burned. But on a more nuanced level, there are several important factors that play out that explain why exactly the company can make money and what Tesla short sellers seem to consistently go wrong with Tesla. When I started thinking about this, I figured it deserved a full article. Maybe this one time will help more skeptics not get burned the next time Tesla shows quarterly profits.
1. Tesla is obsessed with improving efficiency. This can be difficult to understand or believe, and is sometimes difficult to see since Tesla is growing so rapidly and continues to take on new challenges in the midst of rapid growth, but Tesla is obsessed with improving efficiency . I wrote about this at length recently, so I'm not going to repeat that show. Just read about it here: “Capital Efficiency (Tesla's Occupation).”
2. Tesla outperforms the competition, literally (not really) and objectively. I can't tell how much Tesla short sellers understand this (and pretend they don't) in some way never who has digested it. Sure, you might be wondering if Tesla currently has a demand for 60,000 Model 3 quarters versus 100,000 per quarter, but anyone who follows the company closely should know that Model 3 has received fantastic reviews across the automotive industry – like, all across the industry – and pretty much everyone who runs a Model 3 thinks it's amazing. In terms of acceleration, infotainment, autonomous driving, safety, design and more, the Model 3 is a new world wonder in the automotive industry. It wipes out competition in the luxury car class in the medium size because it is so much better. It can also compete with Toyota Camry and Honda Accord for total cost of ownership for many buyers. Tesla owners and fans have explained the car's benefits millions of times in countless ways, but short sellers often insist that the Model 3 is actually a crappy car. Sorry, but objective people do not agree, not at all, and if you do not see why, at least try to pay attention to the statistics and objective reviews.
3. Word of mouth is one thing. The biggest question mark for me has been how fast jungle telegraphing (and exposure to the car in more tangential ways) would spread and lead to sales. In the long run, Model 3 must catch up with buyers, but I wondered how many it could reach in 2019. Nevertheless, anecdotal experiences, Elon Musk's comments on new orders and demand for vehicles, and various articles on CleanTechnica whether ways Tesla could stimulate more demand if production looked like it would exceed orders should give short sellers a sense that demand has gone up. Instead, short sellers have been insistent that Tesla reached a demand cut, that almost no one would want a Model 3 after the first fanboys and fangirls got their cars, and that the sales of mouthpieces would be very limited.
It has even been hype that Tesla hid cars, had more inventory than people think, and no more customers in [ put in place ] because the registrations fell for a week or so . Tesla bulls have claimed: many more people discover every day that the Model 3 is truly amazing. This will continue to be the case as more people receive the car and share it with friends, family, colleagues and neighbors. It looks like Tesla short sellers are just continuing to assume that demand has finally dried up and sales are about to fall off a cliff. This has certainly been the case in recent quarters.
4. Elon Musk is a business genius. Probably the most common assumptions among Tesla card sellers is that Elon Musk is a fraud who doesn't really know how to run a legitimate business, Elon is actually an idiot who can't execute, and Elon is constantly on the verge of taking Tesla off a cliff. I don't really understand where these assumptions come from. I don't understand how you can listen to or look at Elon and come to such conclusions, let alone follow the progress of companies over the last couple of decades and think about it. Elon has a virtually unparalleled track record of success in several industries. In fact, I can't think of anyone who has proven himself to be a more capable and qualified business manager. Billionaires like Ron Baron and Larry Ellison say the same thing, but still assume short sellers or at least try to convince others that the opposite is the case. We Tesla longs to explain why Baron and Ellison support Elon, but the critics call us brainless fanboys instead of being receptive to the points made.
5. Tesla has made money on its vehicles. Some claim that Tesla cannot produce a Tesla Model 3 for the price it sells the car for. In other words, they say the whole business is a Ponzi scheme, a scam, a multi-year accounting trick. Supporters have explained that Tesla provides a solid gross margin on the vehicles and can be easily profitable if it focused on it rather than rapid growth. Some critics have claimed that Tesla will simply lose more money if it sells more cars, and no matter how much we have tried to correct the record and point out actual gross margins, logical cash flow forecasts and the fact that Tesla can actually produce cars for less than the company sells them because, the short sellers have ignored us and screamed, “Bankwupt! Any day now! ”
These are issues that are mostly focused on economics and quarterly topics. They should be enough to warn short sellers that it's dangerous to play with the stock and bet the company's valuation goes to $ 0. However, the even bigger issues for Tesla longings are … long-term issues. The jungle telegraph can grow exponentially. Tesla could crack the nut on self-driving cars years before the competition. Tesla appears to have a massive lead in battery technology and manufacturing. The fruits of Tesla's efficiency obsession will come in the coming years. Tesla's software advantage may be its peak advantage. Electric vehicles are becoming more and more competitive with petrol vehicles a day and will be technically disruptive in time, and Tesla is far from the brand leader and technology leader in this disruptive EV space. Oh yes, and then there is storage of sun and energy. Do you also think it's a rabid Tesla fanbase now? You haven't seen anything yet. Look at what kids and young adults like about Tesla and Elon Musk!
I don't know how many short sellers are serious when they say that Tesla "is going to $ 0." I honestly have no sense when one of them really believes it or just says it to try to cut the price temporarily and get a quick sum. I have no idea how many of them are hired trolls, hired by an oil company, a car dealership, another carmaker, partisan investor or other interest in getting demand for Tesla's and / or Tesla's share price. I can somewhat understand a card seller who thinks they have an opportunity in a challenging transition phase to make money from the company. However, I have a very hard time understanding short sellers who believe the company is doomed in the long run, who do not see the various Tesla benefits mentioned above. One thing is clear: Tesla bulls don't spend their days and nights trying to trick short sellers into believing that the company is about to crash, so they can make money off the company when they succeed. No, we're not trying to play dirty and manipulate people into shorting the company and losing money on it when the stock price goes up. What we have tried to do is explain to others why it is Tesla has seen such strong growth, why it is expected (of us) to continue to grow strongly, and why it is the last company anyone should invest in in the long term. We have tried to tell the story the way we see it. So when expectations come true and short sellers are burned, it is difficult to have sympathy for them. It's hard to sympathize with people who have consistently blocked our arguments and tried to scream "scams" or "idiot" or "stupid fanboy" in response.
The funny / sad thing is that I'm here again and make the case why I think Tesla is a solid long-term investment, but critics will still see it as delusional and continue to bet on Tesla. As LeVar Burton of Reading Rainbow would say, "But don't take my word for it!"
Disclosure: This is not investment advice. I don't give investment advice. If you are considering an investment move, contact an investment professional, or at least a magic 8-ball.
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