Tesla (NASDAQ:TSLA) A Lesson in Why Not to Buy the Hype

Tesla (NASDAQ:TSLA) A Lesson in Why Not to Buy the Hype

Tesla (NASDAQ:TSLA) A Lesson in Why Not to Buy the Hype

$TSLA

Tesla Inc. (NASDAQ:TSLA) said late Monday evening that it expects to report Q-3 earnings after the closing bell Wednesday. Tesla stock was down 0.3% in after hours trading. The company will host a conference call at 5:30p EDT to discuss the Quarter and outlook.

Tesla stock is down 16% this year Vs the S&P 500 gained 3.1%.

For the past 40 years, many stock analysts and financial reporters have frequently boosted 2 investing archetypes:

  1. The “it” Company and
  2. The Superstar CEO.

Many of the “it” were greatly over-hyped, and many of those CEOs owed their success more to good timing than to superlative managerial skills.

Now we have the story of the niche EV maker Tesla, it combines both archetypes.

Its EV line has dazzled with of its early models earning the highest car rating ever awarded by Consumer Reports.

Its CEO, Elon Musk, has long been seen as a visionary, someone who could not only build specialty new cars, but also figure out the riddles of affordable space travel, practical solar energy and hyperfast underground transportation networks.

I do not know how well Tesla will ultimately fare, but it is really amazing by how fast it has gone from an unstoppable Wall Street darling to a lesson for the need to refrain from excessive enthusiasm.

Its stock is down from a high of 383 in early August, to 260.95 on Monday. And CEO Musk has, with just a few Tweets, gotten himself and the company in trouble with the Securities and Exchange Commission (SEC) and come off and immature techie and happless business leader.

This combination is a good example of why the hype machine from the manager, Wall Street and the financial media really does the investor public a disservice.

Tesla’s cult loves its EV, and it innovator.

But, it is in an industry with difficult supply chain issues and confounding politics. Plus, Tesla faces a lots of Top line competitors and a reality that gasoline-powered cars are likely to remain the preferred mode of transportation for a long time in the future.

Tesla’s expansion has been impressive to not sophisticated retail observer .

Tesla is making limited inroads in the luxury car market but it is a bit player as measured in overall vehicle sales.

Tesla has $9.4-B in long-term debt and is adding to its Red ink daily.

And of course, Mr. Musk has gotten the company into serious trouble with his Tweeting fingers. Recall that on 6 August, he reported that he was close to a deal to take the company private with his ‘420’ Tweet.  He really was and did not. Even if he had been, this is the type of announcement that affects stock prices and needs to be made through proper channels. The SEC sanction him and the company for $40-M and ousted him from the Chairmanship.

Mr. Musk reach that settlement with the SEC in late September, then calling the SEC the “Shortseller Enrichment Commission.”

Whatever happens with Tesla in the car business, 1 thing is very clear: its wild business model serves as lesson in why people should avoid irrational exuberance when it comes to buying into the hype.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 260.95 22 October 2018 0.95 260.68 261.86 252.59 5,600,200
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Neutral (-0.22) Neutral (0.04) Bearish (-0.31) Bearish (-0.38)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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