One More Reason Tesla Inc. (NASDAQ: TSLA) is Going to Crash
Elon Musk is a walking contradiction...
Burning billions of dollars in cash every year through businesses that are hanging on the thread of taxpayer dollars, he has been considered by prominent news outlets such as The Huffington Post to be the “greatest CEO of the modern era.”
Pay no mind to the dismal numbers on the income statement and balance sheet, or to candidates like Jeff Bezos, they say; Elon Musk is going to save the world! And he’s going to do it just like Bill Nye did with his critically acclaimed Netflix series: by wielding the newly trademarked brand of SCIENCE™ to stroke people’s egos while the cash rolls in.
This won’t sit well with all of you, I’m sure, but I’ve become convinced that the cult-like backing of Elon Musk is a kind of psychological phenomenon — one that’s been fueled, at least to a large extent, by my generation’s arrogant idea that the world is in extreme danger and that only we can save it.
This mindset is no doubt one of the main factors contributing to the enormous bubble in Tesla’s stock, and Elon Musk is milking it for all it's worth. Indeed, millennials are disproportionately invested in Tesla's stock when lined up with other age brackets.
And if you need some cold, hard proof that Elon has been swindling the American public by feeding off this savior complex, look no further than the simple reality of his two most popular business ventures.
First, we have Tesla Inc. (NASDAQ: TSLA), a company based on the principle that climate change represents an intolerable threat to humanity. If we don’t act now, the world will warm four degrees over the next 100 years, and disaster will follow.
The only solution, of course, is to embrace Elon’s profitless business model.
Never mind that “zero emissions” vehicles are actually 50% emissions from cradle to grave. Never mind charge time or the complete lack of EV infrastructure in urban areas. Never mind that the EPA has concluded that lithium-ion battery production results in a) global warming, b) resource depletion, and c) ecological toxicity...
If you buy a Tesla, or invest in the stock, you can ignore all these facts and pat yourself on the back for socially responsible consumerism. You did it! You’ve saved the world from the coming global warming apocalypse!
But that’s not the only way Elon is doing his part in saving the human race from inevitable self-destruction...
There’s also SpaceX, Elon’s second most well known business venture. According to its website, SpaceX has the “ultimate goal of enabling people to live on other planets.”
The first of these planets, of course, is Mars — which Elon wants to colonize by 2024.
Here’s a headline from Wired when that was first announced in 2016:
"Elon Musk Announces His Plan to Colonize Mars and Save Humanity"
That’s right, folks, if Tesla fails to save Earth from climate change, we can always flee to Mars, a planet with an average temperature of negative 80 degrees Fahrenheit.
For perspective, that’s 22 degrees colder than Oymyakon, Russia — the coldest inhabited place on Earth. Not to mention Mars has no oxygen, an atmosphere that’s 96% carbon dioxide, and pressure so low your blood would literally boil without a space suit.
Funny, isn’t it, how human ingenuity can allow us to adapt and survive in an environment harsher than anywhere on Earth, but a four-degree temperature increase is a problem that can only be solved with carbon credits and subsidies that directly benefit companies like Tesla?
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Of course, none of this is to discount the inevitable demand for renewable energy, the cool factor of Tesla’s vehicles, or the importance of protecting our habitat, but it is to point out that Elon Musk and his fan boys have been inflating the value of his businesses by parading messianic objectives to the public.
Elon Musk and company justify his mistreatment of workers, Tesla’s growing debt pile, missed targets, cash burns, cash needs, and everything else that would normally have investors running for the hills with a virtue-signaling, end-justifies-the-means mentality.
To put it simply, there’s just too much optimization baked into Tesla’s share price right now, specifically in terms of what the company will someday supposedly become. It’s not just priced to perfection; it’s priced beyond it.
Remember, we're talking about a company that's now $8.2 billion in debt, operates at a -12.5% profit margin, and is valued higher than its next largest competitor (General Motors) despite producing just 5% of its revenue.
Anyone who hasn't fallen under Elon Musk's bizarre little spell knows this is absolutely crazy.
For the speculators, it’s definitely been a nice ride, but now that Tesla is about to be all grown up, the numbers will have to speak for themselves. It's not that the company is going to completely fail, but there's little doubt it will fail to meet expectations.
And when that happens, Tesla's share price will come crashing back down to Earth.
Until next time,
Jason Stutman is Wealth Daily's senior technology analyst and editor of investment advisory newsletters Technology and Opportunity and The Cutting Edge. His strategy for building winning portfolios is simple: Buy the disruptor, sell the disrupted.
Covering the broad sector of technology and occasionally dabbling in the political sphere, Jason has written hundreds of articles spanning topics from consumer electronics and development stage biotechnology to political forecasting and social commentary.
Outside the office Jason is a lover of science fiction and the outdoors, and an amateur squash player at best. He writes through the lens of a futurist, free market advocate, and fiscal conservative. Jason currently hails from Baltimore, Maryland, with roots in the great state of New York.
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