Stocks

Tesla (TSLA) Keeps Winning Its War Against Its Bears

Close-up of Tesla logo
Credit: Moose - stock.adobe.com

I have been consistently bullish on Tesla (TSLA) for a couple of years at least -- and you'll find evidence of that if you browse my previous articles on Nasdaq.com. If you do that, you'll also see disclaimers where I disclose that I own the stock. I know and understand that that gives me a subconscious bias no matter how hard I try to be impartial, which is why I declare my interest. I sometimes wonder, though, what excuse the Tesla permabears have. 

After all, every reason they have given over the last few years not to buy TSLA, or to short it, has been shown to be wrong (and in the case of shorting the stock, disastrous). Yet they still keep coming up with new reasons for being bearish against TSLA.

In the early days, I had some sympathy, and even agreed at the time with some of the arguments they made. I even wrote bearish pieces myself back then. That is because for a long time, Tesla was just a concept, not a business. They made great cars, but their production in those first few years was so limited that the path to profitability looked more like a mountain trail than a path -- steep and difficult, with a good chance that it would lead to a fatal fall. Founder and CEO Elon Musk was unorthodox, abrasive, goofy, and arrogant -- all at the same time. There were scary headlines about cars catching fire and going out of control etc., etc.

With time though, Tesla's great products, and the drive to succeed that came with Musk’s leadership, have emerged as the only things that mattered. They navigated that steep path with the help of investors, and the negative headlines were shown to be sensationalism at its worst. Those stories pointed out the remarkably few safety glitches in cars that had a much better safety record than their counterparts. After all, a “One Tesla Catches Fire!” story every six months or so will draw eyeballs, if only because of its scarcity, while a “519 Gas-Powered Vehicles Catch Fire Today” story would get boring after a while if reported daily. (Number based on the last available annual vehicle fire numbers, according to Statista)

More recently, as production numbers began to ramp up, the knock was that margins would be squeezed as other companies started to make EVs. Then it was that they wouldn’t be able to penetrate the Chinese market in the face of local competition. Wrong and wrong again. Tesla has positive margins, something that eluded rival Ford (F) over the last twelve months, and while Tesla doesn’t break down sales by country, the consensus view seems to be that growth in China drove a lot of the massive beat of expectations in the company’s Q1 sales.

What will the next reason not to buy Tesla be? It will probably focus on "value." True, people can look at a stock that has a 540% 52-week gain and a trailing P/E of over 1,000, and naturally ask themselves, "How high can it go?"

TSLA chart

I feel that way myself sometimes too, but then I remember that people have been saying that for years and yet, here we are. The thing is, those value metrics that look so crazy are based on forecasts for the company from analysts who have collectively underestimated Tesla and its investors for years. Until the numbers suggest that they have caught up to reality, I’ll still be a buyer of TSLA on dips, no matter what the bears are going on about.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

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