Elon Musk made waves last week by defying Wall Street elites during an earnings call. The enigmatic yet much-revered tech pioneer described analyst inquiries as “boring” and opened up the call to YouTuber Galileo Russell. Russell owns a mere 54 shares of Tesla (NASDAQ: TSLA) yet Musk handpicked his investment-oriented HyperChange YouTube channel to prove his point.
Musk’s irreverence for convention was initially portrayed as a bad sign for Tesla’s stock. Business leaders who refuse to “play ball” with Wall Street power-brokers tend to suffer a dismal financial fate. However, it appears as though the exact opposite is happening with Elon Musk. His off-the-wall earnings call performance seems to have created a buying opportunity.
The question is how long this window will remain open.
Tesla, a manufacturer of autonomous vehicles, has certainly been hyped up by investors, media members and others in recent years. However, Tesla has not turned a profit in the 15 years it has been in businesses. The autonomous vehicle maker has delayed the delivery date of its Model 3 sedan after production problems. Musk is adamant the new Model Y will be available by 2020. Those who preordered the Model 3 have good reason to question Musk’s promises as they await the delivery of the vehicles reserved months or even years ago.
The fact that the supposedly game-changing Model Y has been pushed back to 2020, well beyond Musk’s initial delivery date, is also cause for concern. Tesla bears also point to the fact that the company’s operating expenses are increasing too quickly. The overarching concern is Tesla might not reach profitability for several more years. However, the same phenomenon occurred with Amazon. The e-tailer remained in the red during its infancy, eventually broke through and made loyal investors copious amounts of cash.
Some analysts question what sort of success Tesla would have if Musk stepped down, proved incapable of working or simply shifted his focus to another project. Those unfamiliar with Musk should know he is a physics genius with aims of colonizing Mars. He is also attempting to create a magnetic levitation train referred to as HyperLoop that dramatically speeds up travel between major North American cities.
Some analysts are concerned Musk has spread himself too thin. After all, he sleeps on a narrow couch in his office in an attempt to ameliorate Tesla’s production woes. Tesla is far from a one-man operation, yet the fate of the company seems to hinge on Musk’s level of commitment.
Tesla’s stock dipped down to $279 after Musk’s peculiar earnings call. Today, the stock is priced over $300. The bounce-back seems illogical as Musk’s behavior undoubtedly burned some Wall Street bridges. However, those who understand Tesla’s technology, Musk’s vision and the coming ubiquity of autonomous vehicles viewed the strange earnings call as a buying opportunity. There is no reason for Musk’s statements to have triggered a sell-off that decreased the automaker’s market capitalization by $2 billion. Though Tesla has delayed delivery dates for several models, the company is still poised to capture a massive portion of the autonomous vehicle market.
If you are concerned with the bad news surrounding Tesla, consider the fact that Musk has doubled down by purchasing 33,000 more Tesla shares. This purchase represents a $10 million gamble, yet Musk is wagering on himself.
Do some research into Musk’s prowess as a physicist, and it is easy to understand his unrelenting swagger. Tesla’s Model 3 has a chance to reshape the auto industry in the coming months and years. The masses have been conditioned to accept ceding control to machines as an inevitability. Tesla is in the catbird’s seat to profit from the shift toward automotive autonomy. The company has more than 1,000 robots assembling vehicle parts for its much-anticipated Model 3. This figure will only continue to grow as its technology improves. Investors should think of Tesla as more of a software company than an automotive company as vehicles are becoming incredibly complex computers on wheels.
As long as Musk can solve the company’s battery pack production woes, Tesla’s stock will continue to rebound. If Tesla is not in your portfolio, the time to add it is now.
Regards,
Ethan Warrick
Editor
Wealth Authority
