Why Tesla Stock Is a Cash Cow
There is no shortage of opinions on Tesla Motors Inc (NASDAQ:TSLA), but that doesn’t mean all of those opinions are worth listening to. When it comes to Tesla stock (TSLA), there’s only one endgame which makes sense…
TSLA stock is likely to keep growing because CEO Elon Musk is a perennial winner. He has proved it over two decades of stellar innovation and management, yet TSLA stock bears continue to doubt him.
I read articles by these folks every day. Their analysis of what he’s doing is less factual than it is an endless parade of nonsense. If you want the truth, look at history. Look at what Musk has been able to achieve, what he’s been able to overcome. Then try forecasting Tesla stock.
I’ll admit the company isn’t the best at meeting deadlines. For instance, Tesla failed to meet delivery estimates in the first half of 2016. That cost the company some goodwill. I understand that, but I don’t get why TSLA stock bears think these missed targets will spell long-term doom for the company. It’s that part of the argument I don’t comprehend.
Sure, Tesla didn’t scale its production as quickly as expected. But demand was still strong. Customers don’t care that Tesla missed a few abstract targets. Remember that 400,000 people pre-ordered the Tesla “Model 3” within a week of its unveiling. It was the largest product opening of all time.
So here’s my point: does it matter if Tesla misses a deadline?
Not really. It matters why the carmaker misses its target. If it’s because not enough people wanted to buy their cars, then yes, it is a problem for Tesla stock. But if the company was just trouble-shooting a minor problem, then it is nothing to worry about. Whether in three quarters or four, TSLA stock is going to deliver.
That’s the point.
What This Means for TSLA Stock
If you look back at Elon Musk’s 2006 “Master Plan” for Tesla, you can see what I’m talking about. In that blog post, he set out a bunch of ambitious goals for Tesla. Years later, no one remembers whether those projects were delayed by a few months.
We only remember that Elon Musk achieved every single one of those goals. Take a look at his to-do list from 2006.
(Source: “The Secret Tesla Motors Master Plan (just between you and me),” Tesla Motors Inc., August 2, 2006.)
Musk built the “Tesla Roadster,” so that takes care of number one on the list. We can check off number two as well, since he used those revenues to create the Tesla “Model S.” Now that the company has unveiled the Model 3, we know that number three is on its way.
And number four goes by a different name these days: it’s called SolarCity Corp (NASDAQ:SCTY). Musk allowed his solar project to mature on the side before bringing it under the Tesla banner.
Despite his goals sounding far-fetched, Musk still made them come true. Knowing this bit of history changes the complexion of Musk’s current promises. He knows what he’s doing. Moreover, Tesla stock shouldn’t be affected by a momentary delay. It should be weighed on the probability of his success.
Given Musk’s record, I would take those odds no matter how many cars Tesla delivers in the third quarter. But not everyone is able to take the long view of things, so let’s consider the numbers. If you really care about sales targets, know that Tesla has far exceeded expectations this quarter.
TSLA stock bears didn’t think the company could deliver even 20,000 cars. Moderate investors were hoping for roughly 21,000, and bullish investors prayed for something between 22,000 and 23,000.
Tesla delivered 24,500 cars. (Source: “Tesla Jumps as Third-Quarter Shipments Aid Musk Funding Plan,” Bloomberg, October 2, 2016.)
The long-awaited surge in production is starting to arrive, which is why you won’t hear much from Tesla stock bears in the coming weeks. These numbers are a bitter pill for them to swallow, because it confirms what I’ve been saying all along: sooner or later, Elon Musk will win. It’s what he does.