As I wrote about last week, Tesla was a play on the disruptive model for how a car company should operate – and on the long term play viability of electric vehicles. My fear was that the stock had run up quite a bit and was set for a fall especially with first quarter earnings being reported. I even attempted to “buy insurance” against this drop. I do give props to Tesla for their quarterly conference calls – instead of going through 30-60 minutes of boring prepared remarks; they issue out the shareholder’s letter – give an hour or so for the market to digest the information, and then the conference call goes straight to questions (which is typically the more interesting part).
So, Tesla reported and investors sent the stock flying higher – to the point where I view it as ridiculous given where the company is today. I don’t know if the stock is higher because of a short squeeze, or it’s just momentum, and it’s become a cult stock with a following, but the company is now worth $9.62B – more than European car manufacturer FIAT. The future still looks promising for the company – they’ve upped their annual production estimate from 20K to 21K and are predicting demand to be even higher in Europe where gas prices are higher than in North America. The company continues to get very positive news releases – such as how the Model S is outselling Mercedes S-Class, BMW 7-Series, and Audi A8s but all this should be taken with a grain of salt – afterall, the Model S has been taking reservations for over a year so of course there’s this pent up demand.
However, I feel like the stock has run up way past where it should be. For my wife’s account, I’ve decided to sell half her shares (I actually sold a little bit too early and missed out on the last day of gains). In a short timeframe, she’s made back her initial investment, and now she can gamble and “let it ride”. As a percentage of her portfolio, Tesla was having more weight than I wanted as her account is suppose to be “safe”. I use this strategy often – especially when shares have increased significantly in a short period of time – allows me to lock in my initial investment, but also capitalizes on any additional rise in share price. We can then use the money to invest in a stock with more certainty, or buy back shares when a good buying opportunity comes around.
For my own shares, I’ve decided to keep them – taking the view of a part-super-super-super-minority owner of a great company. I’ll still look for opportunities where I think I can make a little money on the side – which unfortunately did not work out on my first attempt. Tesla is so early in the game, I predict there will be plenty of challenges along the way (supply chain, demand, capacity, trying to achieve economies of scale, etc.) – all of which will likely bring the share price down and provide further buying opportunities.
To end of the post, I talked about Elon Musk and how visionary he is – some say he is the Thomas Edison of our generation. Well, with all the positive news Tesla is generating, here’s fun neat graphic comparing Elon to Tony Stark (none other than Iron Man!).