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TSLA stock remains an industry leader, as it technology beats its competitors
By Matt McCall and the InvestorPlace Research Staff, Editor, MoneyWire May 11, 2020, 9:41 am EDT
To say Tesla (NASDAQ:TSLA) has been a stud is an understatement. Less than a year ago, bears were cheering on the decline in TSLA stock. They were looking for ultimate destruction … for the stock to go to zero as the company headed for a liquidity event.
What happened next really caught short sellers off-guard. The company raised some capital and put together a few better-than-expected quarters. Remember, this is an emotional stock for a lot of folks, so you’ll get the bears flagging every detail as fraud or an anomaly.
But at the end of the day, price trumps everything. Despite the lockdowns, coronavirus impact and factory shutdowns, TSLA stock keeps on trucking. Shares are up more than 340% from the July lows. The outperformance comes at a time where almost every other automotive stock is under significant pressure.
Bigger Than Them All
Ferrari (NYSE:RACE) has traded well off the lows, but it’s a unique company. It produces a limited batch of high-end vehicles that command impressive margins. The latest rebound has given the stock a market cap of $29.1 billion.
That’s behind General Motors (NYSE:GM), which stands at $32.1 billion after the company beat earnings and revenue estimates. Both companies tower above Ford(NYSE:F) and Fiat Chrysler (NYSE:FCAU), which have market caps of $19.4 billion and $12.9 billion, respectively.
These four automakers have a combined market cap of $93.5 billion. Go ahead and toss in Honda Motor (NYSE:HMC) at $39 billion — the largest of the five — and the combined market capitalization swells to $132.5 billion.
That’s still smaller than Tesla, which commands a $144.6 billion market cap.
Why does this matter? To an extent, it doesn’t. But it’s an excellent illustration that shows just how big TSLA stock has become. While it has plenty of doubters, the bulls have been winning, as shares maintain a bulk of their gains over the past year.
The question now becomes, can Tesla continue?
TSLA Stock Is a Leader
Tesla is a leader when it comes to the autonomous and electric vehicle space. Many want to discredit the company, saying any automaker can produce similar or superior electric vehicles. If that’s the case, then why haven’t they?
Of course, the counterpoint to this question is, internal combustion engines (ICE) are better for profit — something Tesla fails to generate on a consistent basis.
Let’s just be honest. Tesla could have better financials. If it had a sharper focus on cash flow and the bottom line, and management would quit shooting itself in the foot from time to time, investors would be much happier. For instance, more than half of Tesla employees feel CEO Elon Musk’s tweets do more harm than good. Further, its profit line is like a roller coaster — up and down, up and down.
We can see the negatives around TSLA stock. However, we can also see the positives.
It makes a darn good electric automobile. For sub-six figures, consumers can buy an all-electric vehicle that dusts high-end vehicles and even some supercars. Automotive leaders have gone from discarding Tesla as a niche player to acknowledging its headway in the space. Some are also finding Tesla’s technology to be a headache for their companies.
While wonderful automakers like Porsche are just now getting involved in electric vehicles in a very limited way, Tesla is producing four different models. It’s also working on the hyper-quick Roadster and much-hyped Cybertruck. On top of that, it’s working on a semi truck, which already has pre-orders from companies like PepsiCo(NYSE:PEP), Walmart (NYSE:WMT) and others.
Its autonomous driving strategy has been controversial. At the end of the day though, Tesla has a growing network of vehicles using Autopilot out in the real world. That gives it an enormous (and growing) data pile. When it comes to A.I., that’s like a dream come true.
Bottom Line on Tesla
The company began its production out of Fremont, CA. As it was shipping its vehicles globally, Tesla eventually made the push for more factories. Much to the dismay of the bears, its Shanghai Gigafactory opened in Q4. Now Tesla is looking to build one in Europe too.
Of course, this all has a considerable cost. But when you look at Tesla’s momentum, what choice does it have?
Ultimately, demand for Tesla’s products remains high. Whether that’s in China, the U.S. or elsewhere. The trend toward electric vehicles is steadily rising and its leader — Tesla — will continue to lead. Tesla is a buy on the next notable dip.