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I love to hate the company's stock.
Earlier this week, it hit $498 a share and, in doing so, became worth more than any of the Detroit automakers at any point in their history.
Millions of investors are wondering if they should get on board or short the you-know-what out of it.
The answer comes down to perspective.
Here's my thinking.
Tesla Inc. (NASDAQ: TSLA) was trading at just $176.99 a share last July but hit a staggering $498.80 per share earlier this week. That's a jaw-dropping 181.85% off its lows! What's more, that makes Tesla more valuable than Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) combined.
The shorts – meaning those who bet against Tesla – are going crazy with good reason. Estimates suggest that they may have lost as much as $827 million in the past year alone, according to Yahoo Finance.
They got what they deserve.
Trying to bet against Elon Musk is what's known euphemistically as a "widow maker" trade because anybody who tries it loses, sooner or later. Some sooner rather than later, but that's a different story.
I don't think you should buy Tesla, though.
Tesla is uninvestable. There's simply no way to apply conventional metrics to get an accurate valuation, nor is there any easily discernible path to profits.
Elon Musk remains easily one of the most innovative executives on the planet – and totally unpredictable.
To a point I made on FOX Business Network with anchor Neil Cavuto Wednesday, telling him something is impossible is like sending the man an engraved invitation to try it.
The stock is simply too volatile for the average investor and has undoubtedly given plenty of folks a run for their money. Not mention the need for a little Alka-Seltzer!
Where does it go from here?
Analyst Bill Selesky of Argus Research is on record with $556 a share, citing economies of scale and better delivery results in 2020. I think the real story, though, will be China, which remains the largest single consumer market on the planet and a key source of growth.
Personally, I like that the company swung from negative to positive free cash flow recently because that suggests Team Tesla can scale to meet higher expected production and deliveries.
The fact that I don't like Tesla at $498 share probably means it'll go to $1,000 tomorrow!
Even so, I'm still not a fan.
My investing approach is based on two things: 1) a clear path to profits and 2) companies that are changing the world based on flawless execution, savvy management, and stable, protectable margins.
Tesla doesn't have a clear path to profits and, while it does have a savvy manager – Musk – it lacks flawless execution and protectable margins.
Worse, the same old problems we've talked about for years still exist, chief among which are high debt, an unfavorable (but improving) product lineup, and a lack of consistent profits. I'd tell you that competition is a serious threat, but I think electric vehicles are ahead of themselves as a whole.
Tesla could be a great speculative play, though.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.