Tesla's Future

Dear Reader,

Tesla Inc, the electric vehicle manufacturer, is currently regarded as a de facto monopolist on a market which many analysts claim has huge potential, namely electric vehicles.

Actually, Tesla's future seems to be reflected in its current market valuation of 625.45 bln. USD. Investors seem to hold for certain that not only Tesla will dominate electric mobility, but also that electric vehicles will almost fully displace internal combustion engine vehicles.

Actually, I see Tesla becoming a niche player in the cars market. Something like BMW, Daimler with its brand Mercedes Benz and Volkswagen's Audi luxury brand. Yes, Tesla is trying to offer also more affordable cars. However, even Tesla's higher priced cars are not produced profitably if subsidies credits are excluded. I find it difficult to believe Tesla will soon start producing 30 000 USD priced cars profitably in the next 5 years.

Tesla should actually focus on the luxury space more. Another focus for Tesla should be research and development.  Through higher research and development spending Tesla could achieve a technological breakthrough through which Tesla would be able to produce cars with a net profit. Tesla's need for a technological breakthrough is dire. That is because the money from the stock market could soon dry up, if a technology stocks valuation reset or crash sets in.

As Warren Buffett wisely said: "When the tide turns, you see who was swimming naked."

Selling dreams, stories and narratives works only up to a point. Sooner or later Tesla has to achieve a consistent net profit margin of at least 5 %.

Yes, Tesla could open up new verticals of growth like electric vehicles, for example.

But for now Tesla is concentrating on the car market. I estimate the intrinsic value of Tesla is around 120 billion USD.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich