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Is Tesla (TSLA) stock a good buy?


James

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How does Tesla make money?

Tesla generates revenue through 4 categories

  • Automobiles
  • Energy (Includes Solar Roofs and Solar Panels)
  • Leasing
  • Services, accessories, and other

Here is a breakdown per category

  • Automobiles – 87.4%
  • Energy – 3.9%
  • Leasing – 2.6%
  • Services, accessories, and other – 6.1%

Meaning: We know EVs are the future as auto manufacturers around the world compete for market share. The challenge with all auto manufacturers is supply chain. I personally like software companies because you don’t have to source metals, plastics, and components to generate sales. With automobiles, the supply chain costs are high. When you compare Tesla to a company like Apple, you still have to source raw materials but the materials required to sell one unit can fit into the palm of your hand. With automobiles, you need thousands of pounds of materials to sell one unit. Although the world has enough raw materials today, the impact on the environment to manufacture, mold, and shape materials is something to consider.

Management: When I invest in a company, I want the CEO fully dedicated to one company. Yes, they can serve on the board of other companies, as a lot of CEOs do, and yes they can invest in other companies, as a lot of CEOs do, but the CEO needs to be focused. Aside from Tesla, Elon Musk also spends time on SpaceX and The Boring Company. Now, with Elon’s acquisition of Twitter, he’s more distracted than ever. In my opinion, this was the worst time to buy another company, especially a company like Twitter, which does not complement the Tesla brand. When one company buys another company, or in this case a CEO buys another company, it’s wise to complement the ecosystem. Examples include the following:

Microsoft buying Activision Blizzard – This was a wise investment because Microsoft sells Xbox, a top-selling video game system. Activision Blizzard is one of the largest video game publishers with popular games including Call of Duty and Overwatch.

Intuit buying Mailchimp – This was a wise investment because Intuit serves small and mid-sized businesses. Mailchimp, also serves small and mid-sized businesses. The acquisition will allow intuit to cross-sell Mailchimp to its audience and allow Mailchimp to cross-selling intuit products to its audience.

PayPal buying Venmo – Ths was a wise investment because PayPal already has a large consumer base. Venmo became a more popular consumer money transfer platform than PayPal and in this case, instead of trying to beat the competition, PayPal acquired the competition. Now PayPal can offer other consumer products to the Venmo consumer base including Honey.

As the article above from cnn.com states, Musk is indeed a part-time CEO. Shareholders are not getting their full attention and with the competition at the front gates, the castle may fall. In this circumstance, Tesla’s revenue growth may not continue as it has in the last few years.

A quick look at the Glassdoor rating shows Tesla has a 3.6/5.0 and a CEO approval of 73%. That’s actually not too bad. Ideally, we want to see a 4.0/5.00 and a CEO approval of 80%. Both are very close. The question is, how will these scores look a year from now? Distractions from Twitter can’t be good for the Tesla culture.

Moat: EV competition is catching up and even passing Tesla. VW is a big global threat, especially in Europe. We also have Chinese companies threatening global sales including BYD, SGMW, SAIC, Chery, and GOC. GM and Ford will continue to challenge Tesla in the US and globally as well. Yes, Tesla has a strong brand moat but the market is becoming saturated and will likely become more saturated over the next 10 years.

Edited by James

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한국어로 작성해주시면 더 좋을꺼 같단 생각이 들었다가, 아 한국어로 작성하면 이 맛이 안나겠구나 하는 생각이 들기도 하고 어렵내요.

기회가 된다면, 나중에 한번 한국어로 작성해 주세요. 그럼 비교해 볼 수 있을꺼 같아요!

그리고, 4Ms 모델에서 (이유는 짐작되지만) MOS가 빠진거 같아요. : )

흥미로운 글 잘 읽었습니다.

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