I am a big fan of Tesla. Not for their cars since they are out of my price range.
What I love about Tesla is the company repeatedly throws Wall Street for a loop. In short, it does not understand the company at all.
Obviously, anyone who reads my posts knows I view things from the technological background. In my view, it is the major story in every industry and all parts of life. Things are simply moving too fast to ignore the total impact it makes.
Tesla is the first car company to make any significant impact in the United States in over 100 years. From this perspective, it is a winner. Yet, therein lies the problem.
To view Tesla as a car company is a total mistake. In my mind, this is akin to looking at cryptocurrency as financial when it is actually a technology. Tesla is a lot more than a car company.
In fact, I could make a case that if one is a car company, get ready to shut the doors. You might as well be selling rotary phones. Automobile manufacturing is 20th century.
Everyone, Tesla included, needs to be a technology company. We are on the verge of autonomous cars. That requires a great deal of technology. At the same time, profits down the road are going to be from leveraging services on a platform, ala Apple. Car companies that fail at this are going to find it difficult to remain competitive.
Over the last few decades, the market has gotten tougher to read. Companies are a lot more confusing than they use to be. Years ago, you simply looked at the balance sheet and income state to size up a company. Sure there were other metrics to look at but that was the bulk of it, especially in manufacturing.
No longer.
With the introduction of widespread intellectual property, digital platforms, and a host of other technological changes, the world of accounting went nuts. To this day, I maintain that nobody really figured out how to value all this stuff.
And this is why I find the Tesla situation to be completely humorous.
Analysts look at that company like it is a traditional car maker. They use "fundamentals" and traditional metrics to size it up. In all honestly, why is one so concerned about the number of cars delivered in a quarter when the advancement of the hivemind for autonomy is apt to yield a much bigger windfall if successful?
At the same time, why are we so concerned about cars at all? Does Wall Street see this as a dying animal? The truth is the automobile is entering its death cycle. Within a decade, we will see the removal of steering wheels, pedals, and dashboards. Ergo, is what we then have even called a car? Futuristic designs, which might be coming into being in another 5 years, resemble something like a pod. I would say this is more likely the future of transportation.
Of course, there is another market that one could consider growth: energy storage. This is something that is expected to grow exponentially in the next couple decades. Can anyone venture a guess who is one of the leading companies in that field? Tesla.
Probably what I love the most about Tesla is that I see a lot of the same FUD about that company as I do cryptocurrency. Certainly, there is reason to be concerned about the sustainability of the company. That only makes sense. However, Wall Street lenders have shown the willing to give Musk whatever money he needs to keep his progress going.
That said, the traditional players do not seem to get the company. Perhaps a large part of it is Musk himself who lacks the typical Wall Street "style". He does not play in a manner they prefer so they try to penalize him for it.
One thing I can tell you about Tesla is they are following a model that is proving successful in the new era of technology. The worst thing you can do to a company is to label it. If that is the case, get ready to close up shop. Tesla is spreading into technologies that will put it into many different arenas going forward.
Can the same be said for some of the other car companies that Wall Street views more favorably?
We did see this before. Amazon was not the darling of the Street for many years. The same traditional metrics were used and the fact they were not making much money was a sore point. However, like Tesla, those doing the funding saw the potential and kept floating Bezos whenever he needed it. Today, we see how that was a smart idea since Amazon makings like $100B a second and is taking over the world of retail (among other things).
Will Tesla do the same? Who knows. There are many legitimate questions with this company. Nevertheless, I do not feel what the analysts and other typical Wall Street are bringing up is valid.
Ultimately, Musk seeks to create an entire ecosystem similar to Apple or Facebook. It really is the same strategy. He seeks to take over all the personal energy needs at the level of power plant, home, and car.
Is he getting closer to pulling that off? That is the only question that should matter to those looking at Tesla.
If he is, Tesla will likely be a top 10 company in marketcap at some point. On the other hand, if that does not look likely, Tesla could be a house of cards apt to collapse.
Everything else appears to by just noise.
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