Buy the car, not the stock," should be the rule for Tesla.
This is going to be a simplistic explanation on a situation that holds the potential to eventually crash Wall Street, badly damage the U.S. financial sector, and lead to the U.S. dollar no longer being the world's reserve currency. But sometimes simplistic explanations best capture the truth.
The truth is, Tesla's astronomical stock valuation will make us all poorer when it pops.
Despite selling about 500,000 cars per year world-wide while Toyota, GM, Ford, Honda, and Hyundai each sell 1 million+, Wall Street thinks Tesla is the most valuable car manufacturer on the planet... so much so that it's stock value is almost more than all the others combined! That does not make any sense whatsoever... unless you are profiting from the rise now and will sit out the fall at your beach-front home.
Worse than the sales disparity, Tesla LOSES an average of $4000 on every car it sells. Its supposed profit (the accounting is shaky) is based on selling anti-pollution carbon credits to other car companies that do not yet produce their government-mandated quotas of electric cars.
HOWEVER, all these other companies are now producing electric cars as well as their traditional internal combustion gas-burning vehicles. GM says its goal is to be all electric by 2035 (admittedly cars, not trucks--no one has managed to build efficient electric trucks yet, not even Tesla). The other companies all have similar plans. Many of the electric cars they are producing are cheaper than Tesla's. Soon the market for carbon credits will shrivel to almost nothing.
Tesla's market share for electric vehicles is already shrinking even as the overall electric car market is growing. It does not have the capacity or expertise to compete head-to-head with the other car companies once the majority of their products are electric. And then there are the Chinese car manufacturers... who are, thanks to Tesla's deal with the Chinese government, siphoning Tesla's technology.
Let's look at that again... Tesla loses an average $4000 on every car it sells while going from no competition in the electric vehicle market to all competition. Meanwhile it owes $14.1 billion in debt.
Looks like a formula for bankrupcy. Then why is Wall Street still smiling? Because as the Elon Musk-fueled mania keeps rising, the big financial players are timing their exit. It will be the pention funds of everyday Americans that will take the huge loss when Elon admits he was making things up.
This won't happen in 5 years. But it will likely be within 10. Definitely by 2035. Then you will be poorer and angry. As in 1929, Wall Street will be discredited. Interest rates will zoom up. Other business will have no money to grow. The world financial center will move to Shanghai.
How can this be prevented without a bursting bubble? Simply and slowly.
Slowly, the Federal Reserve Bank must start raising interest rates. The FED has held interest rates to 1% under the presumption that the low rates are generating new businesses. No it isn't... it's allowing hugely leveraged speculation in stock, with Tesla being a prime beneficiary. Slowly cut off easy money and speculative stock such as Tesla will start climbing downward--hopefully slowly enough that not too many investors will have to jump out the window.
If we don't do this... the world of 2035 will not be the same as today. And it won't be better... unless you already have your beach-front home and it is already paid for.
For more details see: https://www.defenseone.com/ideas/2020/02/how-stock-bubble-could-unwind-americas-national-security/163047/
Stay safe.
Sam