I’ve been in this business for twenty years and I don’t know that I’ve seen a more polarizing stock than Tesla (TSLA:NASDAQ). It is your typical “cult stock”. Not that that’s always a bad thing. Once upon a time, Apple (AAPL:NASDAQ) was a cult stock and apparently the masses knew what they were doing in that case.
I’ve never been able to get excited about stocks that sport lofty valuation based on hype. Tesla is the ultimate hype machine when it comes to expectations setting. Fulfilling those expectations, well, that’s been a different story. The news stations don’t help by perpetuating the stories. The company has a negative profit margin in the mid teens and burns through cash faster than a back draft. The debt load is mounting and mounting and now the company’s founder uses Twitter to announce that the company would be going private at a hefty premium to where it was trading.
Tesla cars are nice cars. Few will dispute that. I see some of them on the road so I can sort of understand the optimism. The competition is coming, however. If the company does go private, which essentially means buying back all the public shares, it would give them an opportunity to sort out their manufacturing process and some of the financial issues they are having.
For the sake of the shareholders, I hope the company does well and changes the way we view automobiles, similar to what Apple did with the cell phone. I’m just tired of hearing about it.
DISCLOSURE: THIS ARTICLE WAS WRITTEN FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE RELIED UPON AS INVESTMENT ADVICE. THIS IS NOT A RECOMMENDATION TO BUY OR SELL ANY SECURITY SPOKEN OF HERE. ALL INVESTMENTS INVOLVE RISK AND REQUIRE DUE DILIGENCE TO DETERMINE IF THEY ARE APPROPRIATE FOR YOU. I DO NOT PERSONALLY OWN ANY OF THE STOCKS MENTIONED HERE AND DO NOT PLAN TO INITIATE ANY POSITIONS.