Out of all the companies traded on North American exchanges, Tesla Inc. (NASDAQ:TSLA) remains one of the most overvalued of the bunch.
With the company continuing to raise debt to finance its operations, which a number of analysts have question whether said operations will ever become profitable, investors betting on a continued Tesla surge are banking on growth to outpace expectations (expectations which are already very high), with presumably some amount of profitability improvement in the coming quarters.
A few select companies have proven that it is indeed possible to go long periods of time (years) while churning out negative profits (think Amazon.com, Inc.), however at some point, even Amazon investors demanded the company prove it could turn a profit.
While I agree that there are generally two roads to profitability (increase margins by increasing price or reducing costs), a strategy of reducing the input price of new models such as the Model 3 must coincide with costs which are reduced by an even wider margin. To date, the question of if this well even be possible is one which has resulted in Tesla's stock trading sideways. The EV company will likely be under pressure from investors soon, however, to prove its model can work in a viable way in the long-term. Right now, it doesn't appear to be the case.
Invest wisely, my friends.
Tech Insider
