Elon Musk, the founder of Tesla, is no doubt a genius. Here is his CV from Wikipedia;
Elon Musk is the founder, CEO, and CTO of SpaceX; co-founder, CEO, and product architect of Tesla Inc.; co-founder and chairman of SolarCity; co-chairman of OpenAI; co-founder of Zip2; and founder of X.com which merged with PayPal of Confinity. As of June 2016, he has an estimated net worth of US$11.5 billion, making him the 83rd wealthiest person in the world. In December 2016, Musk was ranked 21st on Forbes list of The World's Most Powerful People.
With this kind of unbeatable achievements and experiences, very understandably he is very much admired by investors. This is probably one of the key reasons why Tesla (TSLA) is so much loved by the Street, even though Tesla has never made any money since its inception. On the contrary, it is bleeding heavily quarter after quarter big time. Will Tesla ever be able to make money? Based on what I know, I don't see any hope in the foreseeable future. So the question is whether TSLA can be still so much loved and be kept at this nose-bleeding expensive level in the future? It could be, as we all know that the stock market is not rational and can stay as such for longer than you believe possible. But there is one thing TSLA investors should be aware of that may potentially turn it upside down. Even its survivability may be questionable if this happens.
Anyone follows the solar energy stocks? Solar stocks were the Street darling as well a few years ago even though they could not make any money due to the natural limit defined by the physics. For example, First Solar (FSLA) reached its all time high at $300 in 2008 but since then it has come down year after year and is traded at $30s right now. What happened to solar companies before and after 2008? Well, since solar companies cannot make money by themselves, they have to rely on something to continue their business. The major source of funding before 2008 was the incentives from the governments around the world. Germany used to be one of the major governments supporting solar companies. But such kind of critical incentives came to it end in the past few years that pushed the solar companies onto the deadly path. Believe or not Tesla is in a similar situation as Musk is heavily relying on the government incentives for manufacturing the electric cars. But this may change overnight. We all know that President Trump is very sensitive to the incredibly high government expenditure and he wants to cut down all the costs as much as possible. We've already seen what he did to Boeing for the costs of Air Force One and to Lockheed Martin for F-35. Different from Boeing or Lockheed that are producing something the government really needs but just need to cut down the costs, Tesla is producing luxury cars that are only needed by affluent guys, not ordinary Americans. With so much money Trump needs to fund his ambition of rebuilding the US infrastructure, I bet the last thing he wants to see is the big money spent mainly just for a small group of rich people. Based on the pattern we have seen, Trump will likely target those companies that cost a lot of money to the government. Tesla will logically be one of them and I think it is probably just a matter of time that the day may come when Trump will call or Twitter to Musk to get off the government funding and just rely on its own. If that happens, watch how TSLA will react. A 50% haircut may be a light reaction. I even think it is probably like a death penalty to make Tesla's survivability into question.
If you own TSLA, just keep this in mind. If you are thinking to chase the stock now, think twice!
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