Why Tesla Is Unstoppable

What's up you guys, it's Graham here. So, at this point, we got to talk about Tesla, because as a Tesla owner, a Tesla stockholder, and as an investment channel, I have been watching the price of Tesla stock just steadily rise and rise and rise. Not to mention, I've been following this company for quite some time, and I feel compelled to share my thoughts and discuss what's going on with the company.

And don't worry, I'm not gonna make this one of these like Tesla bull videos where everything is sunshine and rainbows and Elon Musk is like this most amazing person ever. But I'm also not gonna make this video from the perspective of a Tesla short seller who thinks Elon Musk is insane, who over-promises and delivers a subpar product. If you've watched my previous videos, you know I really do my best to take a completely neutral stance in anything I discuss, and I'll do my best to analyze Tesla completely objectively.

I will talk about whether or not the current valuation is justified and whether or not the price could come crashing down. Just in an effort to be completely transparent so you know my affiliation before even beginning the video: yes, I do own a Tesla Model 3; yes, I did buy into Tesla stock, about 260 shares that I've been holding on to for almost a year now; and yes, I still own it. Lastly, I will be asking you guys to smash the like button for the YouTube algorithm because it does greatly help out my channel.

But despite all of that, here's what I think is going on: some background on Tesla and whether or not this could make a good investment, even if the price it's at right now. Again, I'm doing my best to make this as unbiased and objective as they possibly can, because that's how we do it here on the Graham Stephan Channel.

You know, as I'm sure we all know, Tesla's had a pretty rocky past performance, but very few companies evoke the emotional response with investors like Tesla does. No joke, it seems like talking about Tesla is almost as though we're talking about politics or religion. People get very heated and opinionated on their thoughts of Tesla, which I suppose, in a way, is good for Tesla in the sense that no publicity is bad publicity.

Okay, but seriously, Tesla wasn't always off to a good start. They were founded in 2003 under the name Tesla Motors, with the goal of being able to fully commercialize the electric vehicle. Then, a few years later, in 2006, Elon Musk wrote in his Tesla blog that his plan was to build a sports car, use that money to build an affordable car, and use that money to build an even more affordable car. Well, the above also provides zero emission electric power generation options.

Sure enough, 14 years later, he's stuck with the plan. They began with the Tesla Roadster, which is based off the Lotus Elise chassis, which garnered enough attention in the company to parlay that into the creation of the Model S sedan, which was successful enough to create the Model X.

The Model X did well enough to then create the Model 3, which did exceedingly well enough to develop the Model Y, and in the process of doing all of that, has made its investors a lot of money. However, throughout the last decade, that plan has not been met without a lot of skepticism and a lot of difficulties along the way. In 2008, Tesla had to reduce its workforce by 20%, and Elon Musk had to come out of pocket to keep the company alive.

Then, two years later, in 2010, Daimler announced that they would be purchasing 10% of Tesla, which would help keep them afloat. Shortly afterward, Tesla was awarded a $451 million loan by the Department of Energy to further develop the Model S sedan. Not too much later, Tesla goes public, with shares opening at, wait for it, $19 a share, with $226 million of raised capital for the company.

After a lot of skepticism about whether or not the Model S would actually be released in 2012, Elon Musk came through with the first car delivered on a live stream. But even with all of that going on, it was not enough to stave off competition and criticism, most notably being that Mitt Romney called Tesla a loser in one of his presidential debates.

Yet, even with all of that, the Model S was largely a huge success and allowed Tesla to repay their $451 million federal loan nine years early, being the only car manufacturer to have done that. But since then, Tesla has continued to be met with disapproval, apprehension, and debate about whether or not Tesla has what it takes financially to stay afloat.

Despite Elon claiming in 2015 that Tesla would be worth $700 billion by 2025, then a few years later, in 2016, the stock had a rather tumultuous time dealing with low analyst expectations, worried about dwindling demand and concerns about the upcoming production, leading the stock to decline by nearly 30 percent. But still, Tesla carried on.

On April 10th, 2017, Tesla was officially valued at more money than General Motors, and that of course garnered a lot of criticism, of which, as usual, Elon Musk was very quick to respond to. Since that point, Tesla has definitely seen its ups and downs. Even just last year, the stock ended up losing about 40 percent of its value, and even Morgan Stanley just somewhat recently was saying that the worst-case scenario for Tesla was $10 per share.

Although we gotta hand it to Elon Musk, he's turned the tables, cut costs, ramped up production, pushed out Model 3s, and with the recent push towards profitability, the stock is now valued at more than double what it was just a few months ago. Also, at the same time, Tesla became the number one most shorted stock. With a current valuation of what it is today, I'm sure those Tesla short sellers are probably scared shitless.

But what about Tesla and the current price it's at today? Is it actually worth it? Well, the answer is, it really depends on who you ask. If you're pessimistic on Tesla, well, you've really got a few arguments to back up your reasoning.

One, at this level, Tesla is valued at more than GM, Ford, and Chrysler combined, and that could be a bit concerning considering Tesla only delivers a fraction of the cars that nearly every other automaker produces. Second, Tesla shares are trading at 85 times the expected earnings of $1.4 billion in 2020, and again, when you compare that to any other automaker, it's a lot.

Third, Tesla has only barely turned a profit, and even though things are looking optimistic, there's not enough history behind the company to guarantee making future profits. Guaranteed future sales and see more demand for the foreseeable future and beyond. Fourth, Tesla is expected to face more and more competition from competing automakers who want to take away market share.

In fact, automakers all agree electric cars are the future, so that's why they're putting so much money into EV development. That means the competition is only going to be fiercer with time, and Tesla might risk losing a bit of its lead to another manufacturer. That might cause one to believe, based on these factors, that Tesla is indeed overvalued.

To reach any sort of valuation similar to that of other automakers, Tesla would have to continue to see year-over-year 50% growth to be worth what it is today. However, the people who are optimistic about Tesla would argue entirely differently, and they might see it as undervalued. It’s the reason why Fisker initially failed where Tesla excelled. Tesla focused first on technology, and Fisker focused on looks, and obviously, Tesla came out ahead.

This proprietary technology is the reason why Tesla batteries get so much more range than other competing car companies. Not only that, but Tesla's batteries are much cheaper to manufacture, which would further lead them into profit. So what ends up happening is that other car companies are either forced to charge more for their electric cars due to the increased cost of the battery, or they have to lower the range to reduce the MSRP. Either way, it's a loss for other car companies and a big win for Tesla.

Second, one could argue that electric vehicles might see a similar adoption curve to that of the internet or smartphones or TV, and this follows the S curve of growth. This means the beginning is often met with a bit of disruption and off to a slow start. Then, as people begin to catch on to a new wave of technology, it's adopted on a very large scale, and you see a rapid acceleration of growth.

Then once it reaches a critical mass, for most people begin to use it and adopt it, the growth will slow and begin to normalize. People say this is what's happening with Tesla and electric cars in general. Third, Tesla is expanding with really no stop in sight. They're pushing out even more cars, they're coming out with new concepts, and they're expanding their manufacturing.

Over the next few years, Tesla is also one of the few car companies to post consistent growth and success in this space, while almost every other car manufacturer has overall failed at making their big popular electric car. Fourth, arguably, Tesla can move pretty quickly. It doesn't seem like they have this chain of command like other car companies. Instead, it's Elon Musk and his crazy visions, and then other people just make it happen.

I think that's what's allowed Tesla to constantly adapt and evolve faster than anyone else. Plus, they have their existing infrastructure already set up and positioned in such a way that makes it extremely difficult for any other company to compete. For instance, with Tesla's extensive network of superchargers around the entire country.

Finally, from my own anecdotal experience, Tesla has a good product, and I didn't fully understand it until I bought one. Once I drove the Model 3, I was hooked. There was something about it that was unquantifiable, but it makes you feel good, and it makes you want to put up with everything else just for the experience of driving one. That is, after all, to me, what led to my investment in Tesla.

I never ever buy individual stocks, but by driving the car myself, I just felt compelled to be a part of the vision and invest in a company I really enjoy. I have a feeling a lot of other people feel the exact same way, and I guess this one is fairly subjective. In my opinion, Elon Musk just seems like a really likable, funny, cool guy. He's super active on Twitter; he pokes fun of himself from time to time; he doesn't take life too seriously; he's a visionary.

I would put money on the fact that just as many people invest in Tesla because they stand behind and believe in Elon Musk as a person as they do about the car company in general, and something like that is really difficult to put any sort of definitive value on. My thoughts, as far as where we are right now, even as a Tesla owner and shareholder, is that I can't help but think that a lot of the recent push and value is driven more so by hysteria and the drive to try to make a lot of money than it is about the prospect of Tesla taking over the planet.

I mean, I'd be the first to admit I'm a big fan of Tesla; I love Elon Musk, and I even have money at stake here. Even for me, I might be a little worried that maybe we're just getting ahead of ourselves a little bit, and that's where I try to take a step back and give an objective standpoint on the subject.

Now, that's not to say that Tesla does not have incredible technology, and there are a lot of promising features to come in the future, like full self-driving or maybe one day autonomous Tesla Model 3 taxis, which if that ever happens, a $100 billion valuation might just seem absurdly cheap. But right now, I think there are quite a few things that need to happen first before we even get there.

That's why, in my opinion, valuing Tesla purely as an automaker might be incredibly short-sighted. Even though they are a car maker, the real value of this company, in my opinion, is in its data and battery technology. With every Tesla on the road, they receive more and more feedback from its cars that bring it one step closer to completely autonomous driving. Not to mention the extensive network of superchargers that already dominate the entire EV market.

So perhaps valuing the company as a mix between an automaker and a technology company is a little bit more appropriate given everything that they offer. Plus, hindsight is always 20/20, and it wasn't too long ago that people were dumping Tesla stock, criticizing the company, and otherwise passing it by.

Even I questioned my entire investment in the company and whether or not I should let it go, but I largely just believed in the product and Elon Musk, and I stuck it out, and that ended up working out really well. Now, obviously, it's always easy to look back and jump on the bandwagon that Tesla is an amazing investment now that it's been amazing.

Although I challenge everyone to take a step back and realize how easy it is to get caught in this hive mentality of, "This is a really good stock. Tesla to the moon! We're all gonna make a lot of money!" And let our emotions get the best of us at a time where everything is going really well.

Some might argue that by the time I'm talking about it, it's already hit its peak and it's too late, which honestly, who knows? It may or may not be the case, but just be prepared that if you make an investment in this company, you should be prepared for a very wild ride. There have been times in the past where this stock has dropped 30 to 40 percent in a relatively short period of time. So if you cannot handle that type of potential volatility, then you should not be investing.

And yes, it's really fun to make money; after all, that's one of my favorite hobbies. But, you know, what's not fun is losing money. Any time you let FOMO take over and you buy in because you don't want to miss out on any profits, you risk getting burned. All I'm saying here is that it's really easy to be optimistic about a company when everything is going well.

But I would be curious to see what the sentiment would be in the event Tesla stock is to drop 20% in price, and how many people would quickly shift their perspective and all of a sudden be completely fearful and hateful of Tesla because all of a sudden they end up losing money. Of course, that may or may not happen.

I'd be curious to look back at this video in a few months from now and see where the stock price is trading at. But all in all, my completely somewhat unbiased, somewhat objective opinion on Tesla is this: valuing them as just an automaker is a bit unfair to Tesla given just how much else they offer.

To put them in the same category, I think it discounts all of the other innovations that Tesla offers, namely their dominance in the market, their technology, and their data, which no other car manufacturer has. We also can't argue that if things go well, there's a lot of upside. If Tesla implements full self-driving, if they increase production, if they continue growing at the current rates, and if they release a Cybertruck, this could very easily be a $1,000 stock.

However, this is not without a lot of risk that if things don't go as planned, we could see a rather significant correction or, more likely, a very significant overcorrection. To me, this just seems like the type of stock that gets pushed too much in either direction before it again normalizes, kind of where it should be.

Again, just my opinion, so take that for what it’s worth. As far as what I am doing about all of this, the answer is nothing. I'm holding the stock about almost a year ago and selling anything, mostly because I don't want to pay short-term capital gains on a stock that I've held less than a year and then have to pay taxes on it, because that would suck. Also, I don't really need the money right now, so there's no sense in selling it.

But in the event the stock price ends up going down or something happens, then maybe I might buy more. I'm not gonna lie, I'm a little apprehensive of its current value, and that's not to say it can't go higher, because it very well could. But I'm pretty happy with my current position, and if I see people getting a little too pessimistic on Tesla in the near future, then maybe at that time I might end up buying it a little bit more.

We'll see. After all, maybe one day, if all of this goes well, we'll be driving our Teslas on Mars. So with that said, you guys, thank you so much for watching. I really appreciate it. As always, if you guys enjoy videos like this, make sure to destroy the like button, subscribe button, and notification bell.

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