Investor's Corner
Tesla is being ‘anti-subsidized’ in the US, and it’s thriving in spite of it
Ask any TSLAQ believer about one of the biggest reasons for Tesla’s ongoing success, and there’s a good chance that one will hear the word “subsidies.” More often than not, Tesla critics would argue that the electric car maker has only survived because the US government heavily subsidizes it — and without these subsidies, Tesla would fall.
Unfortunately for TSLA bears, this is not an accurate assumption. In fact, if one were to look at what Tesla has had to deal with in the past years (and is still dealing with today), it would actually be more accurate to state that the company had been “anti-subsidized” for the most part, both in its home country and some key territories abroad.
As thoroughly discussed by Tesla investor KarenRei on Twitter, Tesla actually has dealt with a lot of handicaps when selling its cars to consumers. Take the United States, for example. Being a pure electric car company, it was no surprise that Tesla was the first to trigger a phaseout of the $7,500 tax credit given to EV buyers in the country.
Today, Tesla buyers no longer receive tax credits from the United States government, which means that at this point, the company is taking on traditional automakers solely through its vehicles’ own merits. Buyers of pretty much every other car except the Chevy Bolt still receive a $7,500 tax credit, while those who purchase Teslas do not get any incentives. Yet, despite this, the demand for the company’s vehicles has remained healthy.
Another ghost from Tesla’s past that always emerges in the constant bull vs. bear debates online is the loan that the company received during the US financial crisis. Tesla did receive a loan from the Obama administration, but so did other companies, the biggest of which was General Motors, the quintessential American automaker. Tesla would eventually pay back the $465 million loan it received from the US government — 10 years early. GM, in comparison, defaulted on their own loan. This nifty little detail usually gets a bit overlooked whenever Tesla’s loans are discussed among critics.
But what about state incentives that are granted to Tesla for, say, building Giga Nevada? Well, that’s not particularly unique to the electric car maker, either. It should be noted that it is a pretty common practice for states to offer incentives to attract large corporations to invest and build their facilities within their borders. Doing so triggers an influx of jobs, as well as potentially positive effects for local businesses.
And don’t forget that Tesla is still struggling to formally sell its cars in several US states. It’s almost ironic how Tesla was able to secure land, build a factory, and start delivering locally-produced Model 3s in China to consumers before it was able to get permission to sell its cars in parts of its home country, like Texas.
In other territories, Tesla receives anti-incentives as well. This happened to the Model 3 in Canada, whose EV incentives required the base price of qualified vehicles to start below the cost of the Model 3, effectively excluding Tesla’s most affordable vehicle. This reflected a similar strategy adopted in Germany when the Model S was released in the country.
Keeping these in perspective, it almost seems like governments across the globe earnestly want electric cars to succeed. But when it comes to Tesla, the company has not been handled with kid gloves at all. Far from it. In a way, it seems fair to argue at this point that Tesla’s success, as evidenced by its 112,000 vehicle deliveries in the fourth quarter of 2019, is happening in spite of anti-incentives that are consistently thrown its way. Perhaps, just as argued by the company’s supporters, Tesla’s products just happen to be very compelling for buyers.
H/T @enn_Nafnlaus/Twitter
Tesla (NASDAQ: TSLA) is being called “the biggest meme stock we’ve ever seen” by Yale School of Management Senior Associate Dean Jeff Sonnenfeld, who made the comments in a recent interview with CNBC.
Sonnenfeld’s comments echo those of many of the company’s skeptics, who argue that its price-to-earnings ratio is far too high when compared to other companies also in the tech industry. Tesla is often compared to companies like Apple, Nvidia, and Microsoft when these types of discussions come up.
Fundamentally, yes, Tesla does trade at a P/E level that is significantly above that of any comparable company.
However, it is worth mentioning that Tesla is not traded like a typical company, either.
Here’s what Sonnenfeld said regarding Tesla:
“This is the biggest meme stock we’ve ever seen. Even at its peak, Amazon was nowhere near this level. The PE on this, well above 200, is just crazy. When you’ve got stocks like Nvidia, the price-earnings ratio is around 25 or 30, and Apple is maybe 35 or 36, Microsoft around the same. I mean, this is way out of line to be at a 220 PE. It’s crazy, and they’ve, I think, put a little too much emphasis on the magic wand of Musk.”
Many analysts have admitted in the past that they believe Tesla is an untraditional stock in the sense that many analysts trade it based on narrative and not fundamentals. Ryan Brinkman of J.P. Morgan once said:
“Tesla shares continue to strike us as having become completely divorced from the fundamentals.”
Dan Nathan, another notorious skeptic of Tesla shares, recently turned bullish on the stock because of “technicals and sentiment.” He said just last week:
“I think from a trading perspective, it looks very interesting.”
Nathan said Tesla shares show signs of strength moving forward, including holding its 200-day moving average and holding against current resistance levels.
Sonnenfeld’s synopsis of Tesla shares points out that there might be “a little too much emphasis on the magic wand of Musk.”
Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever
This could refer to different things: perhaps his recent $1 billion stock buy, which sent the stock skyrocketing, or the fact that many Tesla investors are fans and owners who do not buy and sell on numbers, but rather on news that Musk might report himself.
Tesla is trading around $423.76 at the time of publication, as of 3:25 p.m. on the East Coast.
Elon Musk
Elon Musk affirms Tesla commitment and grueling work schedule: “Daddy is very much home”
The remarks came as Tesla shares crossed the $400 mark on the stock market.
Tesla CEO Elon Musk reiterated his commitment to the electric vehicle maker and its future projects this week, responding to speculation following his $1 billion purchase of TSLA stock.
The remarks came as Tesla shares crossed the $400 mark on the stock market, extending a rally fueled in part by Musk’s TSLA purchase.
Elon Musk’s nonstop work schedule
Amidst the reaction of TSLA stock to Musk’s $1 billion investment, Tesla owners such as @greggertruck noted that “Daddy’s home.” Musk replied, stating that “Daddy is very much home.” He then shared details of a packed weekend of work, which was definitely grueling but completely within character for a “wartime CEO.”
Musk did note, however, that he had lunch with his kids during the weekend despite his extremely busy schedule.
“Daddy is very much home. Am burning the midnight oil with Optimus engineering on Friday night, then redeye overnight to Austin arriving 5am, wake up to have lunch with my kids and then spend all Saturday afternoon in deep technical reviews for the Tesla AI5 chip design.
“Fly to Colossus II on Monday to walk the whole datacenter floor, review transformers and power production (excellent progress), depart midnight. Then up to 12 hours of back-to-back meetings across all Tesla departments, but with a particular focus on AI/Autopilot, Optimus production plans, and vehicle production/delivery,” Musk wrote in his post.
Wartime CEO
Wedbush analyst Dan Ives described Musk as operating in “wartime CEO mode,” highlighting autonomous driving and AI as a trillion-dollar market opportunity for Tesla. Musk reiterated this point late last month as well, when he outlined the several projects he is juggling among his numerous companies. At the time, Musk stated that he was busy with Starship 10, Grok 5, and Tesla V14. This was despite his notable presence on X.
With Tesla Master Plan Part IV being partly released, the company is entering what could very well be its most ambitious stage to date. To usher in an era of sustainable abundance, Tesla would definitely require a “wartime CEO,” someone who could remain locked in and determined to push through any obstacles to ensure that the company achieves its goals.
Elon Musk
Tesla analyst says Musk stock buy should send this signal to investors
“With Musk’s (Tesla stock) purchase, combined with the upward momentum for delivery expectations and robotaxi rollout, we are becoming more bullish.”
Tesla CEO Elon Musk purchased roughly $1 billion in Tesla shares on Friday, and analysts are now breaking down the move as the stock is headed upward.
One of them is William Blair analyst Jed Dorsheimer, who said in a new note to investors on Monday that Musk’s move should send a signal of confidence to stock buyers, especially considering the company’s numerous catalysts that currently exist.
Elon Musk just bought $1 billion in Tesla stock, his biggest purchase ever
Dorsheimer said in the note:
“With Musk’s (Tesla stock) purchase, combined with the upward momentum for delivery expectations and robotaxi rollout, we are becoming more bullish. This purchase is Musk’s first buy since 2020. To us, this sends a strong signal of confidence in the most important part of Tesla’s future business, robotaxi.”
Musk putting an additional $1 billion back into the company in the form of more stock ownership is obviously a huge vote of confidence.
He knows more than anyone about the progress Tesla has made and is making on the Robotaxi platform, as well as the company’s ongoing efforts to solve vehicle autonomy. If he’s buying stock, it is more than likely a good sign.
Tesla has continued to expand its Robotaxi platform in a number of ways. The project has gotten bigger in terms of service area, vehicle fleet, and testing population. Tesla has also recently received a permit to test in Nevada, unlocking the potential to expand into a brand-new state for the company.
In the note, Dorsheimer also touched on Musk’s recent pay package, revealing that William Blair recently met with Tesla’s Board of Directors, who gave the firm some more color on the situation:
“We recently participated in a meeting with Tesla’s board of directors to discuss the details of Musk’s performance package. The board is confident of its position in the Delaware case and anticipates a verdict by end of year. It does not expect a similar situation to occur under new Texas jurisdiction. Musk has the board’s full support, and we expect he’ll get more than enough shareholder support for this to pass with flying colors.”
Tesla stock is up over 6 percent so far today, trading at $421.50 at the time of publication.
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