Confessions of a Tesla skeptic…..
Before I start- Is there a creed for bears that will make them acceptable around here? I get how obnoxious the naysayers can be. I probably won’t post often, but how about this…
I commit to:
- try to bring some humor to my posts.
- not post on down days.
- cheerfully admit it if I’m wrong - and congratulate the bulls.
- not gloat if I’m right.
On to my Tesla tale.
Good Lord, I’ve been trying to slay this white whale for years……kept the bets small, and cut my losses when things went against me (and did they ever, as all the bulls who’ve 10X’d, 50X’d, can attest). Yes, I’m one of those guys you were ridiculing as you were getting rich! Anyway, as of today I’ve crawled back to break-even on this crazy journey. Considering how wrong I was about Tesla auto demand in 2018, I consider myself fortunate.
Here is how I see things now, given the narrative has suddenly shifted to FSD, Optimus, and Robotaxi (Energy I will put aside for the moment).
In each case Tesla faces deep-pocketed, highly motivated competitors as well as massive regulatory hurdles (at least for true FSD and Robo). And while Tesla has great tech for a car company, I’m skeptical that they have great tech compared to a true tech company.
The crux of the bear case is well known; assuming the car business is worth maybe $50-100B, the additional ~$450 B in market cap requires that in at least one of these 3 projects, Tesla must achieve three very difficult things:
1) beat the competition to the goal;
2) make big margins; and
3) convince the market these margins won’t be competed away, which is necessary to keeping a lofty P/E ratio.
I just don’t believe they will thread ANY of these needles. As an example, am I wrong in stating that every new auto safety feature has eventually become standard, and basically free? So even if Tesla beats the competitors to true FSD, how long would they be able to make real money on it?
Worse, IMO, is the risk / reward being offered here. What I view as moonshots, the uber-bulls view as sure things; and the stock is priced accordingly. I would gladly buy Tesla at a $50B market cap, with all that upside if the moonshots pay off. What I can’t see is a $550 B valuation, which prices in at least one of these moonshots hitting. It’s like drawing to an inside straight and only getting even-money on it.
(Heltok, that’s a nod to you. I remember you from 2+2).
To all this, the obvious retort is: ‘Tesla faced equally imposing obstacles in 2018 and overcame them. They will do it again.’ That’s fair. It may even be true. There’s no denying Musk’s genius and track record. That’s why this is just a 3% position for me (January 2026 $150 puts). It’s enough to hurt if I’m wrong, but not enough to cause major damage.
Why January 2026? I’m predicting the market loses patience after multiple quarters of mediocre profits. Assuming even $3 EPS for ‘24/’25, maintaining a 60X ($180 SP) multiple seems implausible to me.
My biggest risk, besides being wrong, is that the market gives grace to Tesla for longer than I think it will. Musk is without parallel in marketing his vision and is backed by an army of devoted retail shareholders. Maybe they CAN keep the stock up here for years at 60X.
So that’s basically it; full disclosure. Why do I hang out here? The Tesla / Musk saga is the most fascinating financial story I’ve seen in decades. Who can resist the drama? Also, I enjoy this board. I lurked here for years before registering. I understand the bull case; and have nothing against the bulls. The euphoria around here a few years ago must have been life-altering! I’m happy for anyone to have done well in the stock market (FWIW, also, my bet here is completely against type; I’m a true buy-and-hold Buffett / Munger type guy. Which is probably why this won’t work out, lol).
Thanks for hearing me out.
P.S. If you want to improve your investing (and be highly entertained), check out the Corner of Berkshire and Fairfax. Lots of good spirited, healthy back-and- forth on individual stocks. Really good analysis and stock ideas. No, I have no financial interest in the site. I’ve gotten some great stocks from it though.
thecobf.com