Tesla Stock Is Among Least Volatile And Is Highly Lucrative

AUG 14 2018 BY VANJA KLJAIC 36

The media and short sellers may be wrong after all

Last week, Elon Musk, Tesla CEO, made world news by announcing his plan to take the company private. The market reacted immediately, with the TSLA stock skyrocketing. Even though a lot of short sellers expect the stock to fall, that didn’t really come to fruition. Neither did all the negative headlines we’ve seen lately.

Media pundits and naysayers predicted everything from Tesla burning through more cash than they can make and attract through investments, that the company is going bankrupt or simply, that Elon Musk has gone crazy and his Wile E. Coyote-like plans are going to be the end of everything Tesla related.

However, Tesla prevailed. And according to Bloomberg, the best is yet to come for this company and its zero-emission vehicles.

Some of the shortcomings that are associated with Tesla include “burning through cash” (reported 135 times by Bloomberg alone since 2013), the company has more short-sellers than 499 of the companies in the S&P 500, a rather high management turnover, and a temperamental leader. However, investors embrace Tesla’s strong signals that allow it to be on the path of becoming the most important automaker in history.

This was best showcased when an article published in Washington Post’s Economy & Business section, headlined with: “Inside the Tesla Factory: Burning cash, trying not to burn out” came out. Within 24 hours, Tesla shares rallied more than 16 percent – its biggest one-day gain since 2013 – right after Musk said – once again – that the Palo Alto firm doesn’t need any money and will be profitable rather soon.

Tesla Semi

Tesla CEO Elon Musk speaking at the semi truck reveal.

In reality, the media’s burning-through-cash fixation misses the point about Tesla entirely. Their shares have proved to be the least volatile and most lucrative among its five largest competitors during the past five years, according to data compiled by Bloomberg. The shares increased value 10 times since 2013, a rate that that is exponentially faster than revenue growth for Fiat Chrysler (1.2 times), Ford Motor Co. (1.1 times) and General Motors Co., whose revenue decreased 8 percent.

During the same time, Tesla’s market capitalization grew 3.3 times. In doing so, it surpassed those of Fiat Chrysler (2.3 times), GM (1.1 times) and Ford, which lost 40 percent of its value, according to data compiled by Bloomberg.

For Bloomberg, the best is yet to come. Tesla is expected to improve its sales by 72 percent in 2018. Next year, the U.S based carmaker is forecasted to grow 40 percent, while 2020 is projected to have a 24 percent growth. The Model 3 is on pace to become the best-selling entry-luxury sedan in the U.S., beating the likes of the BMW 3 Series and Mercedes-Benz C-class this year and in 2019 – according to data revealed by Bloomberg New Energy Finance in a June 13 report.

“Tesla could compound falling sales at incumbent automakers like Audi, BMW, Daimler and Infiniti,” according to the report

The money men are actually investing heavily in the car maker. This is most evident through a recent filing with the Securities and Exchange Commission. This shows us that 193 mutual funds have invested $9.8 billion in Tesla shares. That amount comprises about 1 percent of the total assets of these funds. Furthermore, the 194 funds holding Tesla produced a 2.67 percent risk-adjusted return during the past three years. On the other hand, the 570 funds holding other carmaker stocks provided a 1.99 percent return, after adjusting for share-price volatility.

To conclude things, Bloomberg points out that Tesla is spending money at a rate considered unsustainable. But shareholders remain indifferent to this perceived peril because the company is creating increasingly more value the same way Amazon did more than a decade after reporting no earnings. It seems that investors aren’t concerned about the growing pains the U.S car maker faces right now. After all, we’re all envisioning a future where the vehicle of choice for most people is electric. According to Bloomberg, that might happen in 2040 when they predict that 55 percent of new car sales will be electric vehicles.

Source: Bloomberg

Categories: Tesla

Tags: , , , ,

Leave a Reply

36 Comments on "Tesla Stock Is Among Least Volatile And Is Highly Lucrative"

newest oldest most voted
carcus

I guess somebody should tell Elon not to worry about the shorts. … if anything, they’re helping.

Dan F.
Tesla will definitely survive; even if it does have a “cash crunch” and can’t issue new debt, new equity money will come in. The question is, at what valuation. The stock is not at behaving like the stock of a company going private at $420/share. The whole point of the short case is not that Tesla will fail or go bankrupt, but that the valuation is too high. To justify the current price—let alone $420— at lets say 15 times earnings (about twice that of the typical automaker because Tesla IS a growth story) it would need to be making $ 4 billion per year or $23 per share per year. Whether you think Tesla’s stock is overvalued, undervalued or just right depends on how much Tesla can earn at certain future dates and what PE ratio it deserves based on its then ongoing growth potential and/or risk of contraction. This is NOT a moral story but a valuation story. Warren Buffet said that the stock market in the short run a voting machine (popularity) and in the long run a weighing (value measuring) machine. Time will tell what Tesla is worth.
Nix

“did he even tell his board that he was looking to secure funding to go private before he publicaly claimed to have secured the funding,”

Yes. Was it your intention to prove your complete ignorance of the basic facts? If so you succeeded.

“On August 2nd, I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share.”

https://www.tesla.com/blog/update-taking-tesla-private

(first try went to wrong place. My bad)

zzzzzzzzzz

Somebody should tell Elon that *Tesla Killer is here.. and it is not automaker and not Chanos*!
The Tesla Killer company is called TWITTER.

But what you can tell to a CEO who tweets while on “acid” trip? Or so was the story from this Azealia Banks rapper after visit to Elon mansion.

KevinZ

That’s not a very nice thing to say about someone.

Chris O

Yet it’s the sort of thing people are allowed to carpet bomb this forum with by the moderators. Kind a wierd really.

tekram

The quote from this piece came from the Bloomberg Opinion article which stated: “At the same time, the 194 funds holding Tesla produced a 2.67 percent risk-adjusted return during the past three years, when the 570 funds holding the other automakers provided a 1.99 percent return after adjusting for share-price volatility.”

The major problem with this (Bloomberg opinion piece) analysis is that they are calculating the risk adjusted return of 570 funds that held other automakers compared to the risk adjusted return of the 194 funds holding Tesla. This analysis has no resemblance to the reality of calculating the risk adjusted return of the individual automakers TSLA, FCAU, GM and F. If you calculate the risk adjusted return for the last 3 years for those individually automakers, you actually come out with FCAU (Fiat Chrysler) as the best risk adjusted returns.

Censorship LOL

Look, this is what happens when this blog decides to wade into the financial side of this company. They just don’t have the expertise to write informed articles that involve finance (neither do most of the commenters, for that matter). It’s why they took so long to comment on the Take It Private tweet, and when they finally did, did so with terrible reporting (for example, ignored the fact that Tesla’s board had asked Musk to recuse himself as they investigated his claim, which in and of itself is an astonishing event that merits its own story).

They’ll probably delete this comment, and I’ll probably repost it. I’ll never understand the technocrat’s obsession with censorship, but that’s another issue.

TM3x2 Chris

What is astonishing now? Musk asked by the board to recuse himself or the board reviewing (not investigating as you claim) Musk’s taking Tesla private proposal.

https://www.cnbc.com/2018/08/09/tesla-board-tells-elon-musk-to-recuse-himself-prepares-to-review-take.html

TeslaPlease

This is normal and not unusual. They will ask Elon AND his brother to recuse themselves because they stand to profit from the privatization and could be seen as not representing the best interests of the stockholders.

The Solar City acquisition lawsuits suggest Kimbal’s exposure to a Solar City bankruptcy influenced the decision to acquire the company and dump the debt on the Tesla stockholders.

The board needs to do their job with greater rigor

Pushmi-Pullyu

“…terrible reporting (for example, ignored the fact that Tesla’s board had asked Musk to recuse himself as they investigated his claim…”

I don’t know if you’re actually this ignorant or if you’re just trolling. Don’t care much either way.

It’s expected for someone to recuse himself when he has a personal stake in the outcome of a review (not an “investigation”, as you insinuate) or a board of director’s vote. If Elon didn’t volunteer to recuse himself, then Tesla’s board absolutely did the right thing in asking him to.

P.S. — This EV news website is not a “blog”. You need to look up the word and find out what it means.

Censorship LOL

You must be a contributor to this site – I totally crushed you in my reply, and it was deleted. So which of the amateur reporters that works for this blog are you?

CDAVIS

@Censorship LOL said: “…ignored the fact that Tesla’s board had asked Musk to recuse himself as they investigated his claim, which in and of itself is an astonishing event that merits its own story…”
————

Lol…

Another example of anti-Tesla Jim Chanos wolfpack fud…. framing the normal as abnormal because it’s Tesla doing it.

The board asking Musk to recuse himself is a normal board fiduciary procedure meant to assure special committee evaluation of Tesla going private is not biased… it protects both Musk and the Board from future claims that shareholders interest were not fairly represented.

Pushmi-Pullyu

^^ this.

Nix

Meh. The source is Bloomberg opinion page, they are just reporting on it. Based on your standards, if they don’t cover everything said about Tesla they are doing it wrong, so you can’t have it both ways.

They will probably keep it up BishPlease or David “green” or Super Weird or whoever (who really cares), to show what a whiny little punk you are that you can’t even post under your own name.

rey

I wouldn’t touch a FCA or Chryco product with a 10 ft pole. let alone the stock

TM3x2 Chris

I don’t know about FCA products, the FIAT 500e is a fun to drive pocket-rocket.
You might be right about the FCA stock, just came down from its heights in January and seems to be trending south.

Nix

Jeep products sell well. A PHEV Jeep Wranger with 25+ miles range would sell well and disrupt the crap out of the market.

Nix

Yes, this is exactly what I thought. Those funds are too far removed from statistically from TSLA itself for the numbers to be meaningful. Their overall numbers are more reflective of the 98-99% of everything else they are invested in besides TSLA or any of the other car makers.

It is like throwing a glass of water into a tub full of water, and then saying the tub can’t hold one glass of water because it overflowed.

John

And, enter in the Tesla haters/shorters in .. 3.. 2.. 1..

Nix

You didn’t even get to “3” before they jumped in.

John

Given the negative ‘thumbs’, they didn’t disappoint!

rey

And this article just puts a nail in Chanos TSLA Short coffin

Pushmi-Pullyu

“Tesla Stock Is Among Least Volatile…”

By what yardstick?

I just googled [is tsla a volatile stock?], and every hit I see only reinforces what I’ve read many, many times: That TSLA is a highly volatile stock.

Omicron

Yeah, I’m not buying that claim either. I’m no Tesla bear… in fact, I hold shares. And my portfolio management software automatically calculates various performance metrics not just for the whole portfolio, but for each individual stock as well, and draws them graphically.

Tesla is the most volatile stock in my portfolio by a factor of three.

Okay, granted, the source specifically makes the claim that Tesla’s stock has been less volatile over the last couple years than the stock of a certain few other automakers, none of which I am invested in, so I cannot actually say whether that specific statement is true or not. I find it hard to believe, myself, and the source fails to offer proof (they immediately divert into talking about stock value instead), but I can’t exactly disprove it.

Nix

“did he even tell his board that he was looking to secure funding to go private before he publicaly claimed to have secured the funding,”

Yes. Was it your intention to prove your complete ignorance of the basic facts? If so you succeeded.

“On August 2nd, I notified the Tesla board that, in my personal capacity, I wanted to take Tesla private at $420 per share.”

https://www.tesla.com/blog/update-taking-tesla-private

Doggydogworld

The non-Musk board members released a statement last week verifying that Musk had raised the issue with them and they discussed funding.

Musk actually had no obligation to tell the other board members anything at that point. His public announcement, on the other hand, was highly irregular and almost certainly violated SEC and NASDAQ regulations. He’ll only get wrist slaps for that, assuming he follows the advice of the lawyers he just hired.

Nix

from the Bloomberg opinion piece: “During the same time, Tesla’s market capitalization grew 3.3 times. In doing so, it surpassed those of Fiat Chrysler (2.3 times), GM (1.1 times) and Ford, which lost 40 percent of its value, according to data compiled by Bloomberg.”

This is the best metric for comparing Tesla market cap vs. other companies. The actual market cap dollar value can’t be compared between these companies, because Tesla owns their own sales/distribution/service and the others don’t. But the growth rate or loss rate is entirely independent of the actual $$ value. This along with market share numbers for how Tesla is beating companies like Jag in total sales show how Tesla’s growth rates are so strong.

Censorship LOL

“But the growth rate or loss rate is entirely independent of the actual $$ value.” The last time this sort of absurdity was the prevailing mindset was during the dot com bust. “Entirely independent of the actual $$ value” – lol!

Nix

“The Model 3 is on pace to become the best-selling entry-luxury sedan in the U.S., beating the likes of the BMW 3 Series and Mercedes-Benz C-class this year ”

This is even with Tesla actually only hitting their ramp targets 2 quarters late in 2018!! The reality is that they are massively pushing into the traditional ICE car market straight out of the gates as they just reaching ramp-up debuting straight at the top.

For perspective, other car makers have been fighting for decades to try and challenge this market sector and have failed repeatedly.

This is amazing results and very good for EV’s in general.

Censorship LOL

Define “entry-luxury sedan” – what is the average price of the “entry-luxury sedan” market?

Another Euro point of view

The question now seems to be: did Musk find the ultimate myopic sugar daddy ?

Lou Grinzo

If this site decided to stop writing about the financial side of the EV market and stuck to technology, product reviews, and actual sales numbers, that would be just peachy by me.

I am NOT saying that financial news and analysis are not important to the EV market. Clearly they are, and only someone with his/her head deep in the sand would say otherwise. But these articles inevitably turn into very poor quality comments and an increased level of pointless snark. If I want to read that kind of content, I’ll read the politics-related stuff on slashdot [shudder].

Very much agreed, Lou. We rarely cover stock, financials, etc. It’s not our thing and we don’t try to make it seem as if it is. This latest move by Musk has been somewhat of an exception. To be honest, we really did try to avoid covering it for a number of days. A few commenters gave us a ton of flack for that. There wasn’t anything concrete and it was still a developing story. We had a few editors and writers that offered to touch on some of the Tesla stock stories since it’s huge in the news right now. I can tell you, though, that it isn’t and won’t be commonplace for us to be covering much of this type of information. Nonetheless, there are always exceptions.

amir

Honestly, I don’t care about all this.
I know one thing-everybody I know wants a Tesla now.

Mark Baum

Just had to come back and leave a big LOL. Sorry guys. This headline is like saying that Trump is the smartest POTUS of all time. I would expect an article like this from these Evannex cultists but not from your staff!