The concept that Tesla Inc. (NASDAQ:TSLA) is some miracle unicorn of a company and that our good lord and God-king Elon Musk will deliver the world from a state of carbon pollution to paradise is about as naïve a concept as I can think of in the financial world.
There are plenty of great companies in renewable power and transportation solutions out there with much better fundamentals and better balance sheets than Tesla. This is because Tesla remains riddled with debt and is highly exposed to a recessionary environment, given the luxury-good nature of its products.
Chinese demand for Tesla vehicles is supposed to be the key driver of Tesla’s astronomical growth rate, which is factored into its ridiculous valuation. I see no possible way Tesla reports anything other than multi-billion-dollar FCF losses in the next few quarters for this reason alone.
Tesla’s Chinese growth driver just won’t deliver the amazing results that analysts, who hype Tesla, believe will see materialize based on fundamentals and good, old-fashioned mathematics. If the company isn’t producing cars, and if the Chinese middle class worker doesn’t get his raise and can’t afford a Tesla, then there will be no growth.
Tesla’s stock remains a serious growth trap, and I’d encourage investors to steer clear of this company at all costs.
Invest wisely, my friends.
