The story of Tesla Motors (NASDAQ:TSLA) is one that has given hope to clean energy enthusiasts, rallied huge gains for long term investors, and confounded many short sellers who still cannot believe why the stock price is so high.
In many of the articles that we've seen over the past year, from various contributors on Seeking Alpha to elsewhere in the blogosphere, there has been stymied disbelief and manic exclamations about the over-valuation of TSLA, and portrayals of immediate collapse that are waiting just around the corner, if only the readers could just see the "truth". To their credit, the fundamentals of Tesla were a long shot from healthy looking, and there was much room on the table for failure. However, what every person seemed to neglect is what really drives the stock market valuation of any particular stock. Detractors and promoters argued back and forth over sales figures, government subsidies, loans, P/E ratios, and the like, however the price kept increasing, and short interest remained relatively high as we reached and eclipsed the first quarter.
With the volatility that we've seen with this stock since its first IPO, all the way through early this first quarter, it's easy to become engrossed in the battle between the yeas and nays. Even looking at the balance sheet, it's hard to believe the journey Tesla Motors has made, or that it could continue on this amazing run.
But that's exactly the point. There is something that balance sheets, fundamentals, and all the tools that everyday investors who didn't know the company couldn't see. It was sheer market demand. Every student involved in green energy, sustainable engineering, new tech, and automobiles has heard of Tesla Motors. Since the early days of the Roadster, Tesla Motors has been generating an impressive fan base, making an icon out of the still yet-to-be-well-known Elon Musk, and giving hope to the "tech loving environmentalists". But before Tesla became a whipping boy for conservative pundits in the media, the company wasn't just a left-wing dream. It reinforced the idea that American industry could still innovate, and build its way to success. Take away the politics of the loans it received, the tax breaks to consumers, and the hyped up "All EVs are meant to fail" and you're left with a company and a story that all Americans can rally behind. With each purchase, Tesla customers have generated enthusiasm for a product with an effectiveness that no advertising campaign could ever dream of. People loved the products created by the company, raising awareness of its loyalty to consumers. Built on a dream of creating an electronic vehicle for the "everyday consumer", Tesla management has executed its game plan to near perfection, rallying people around its cause, while simultaneously raising the fame and profits of all those involved.
This excitement can't be measured simply by a balance sheet, calculated based on operating ratios, or determined by the number of cars delivered. The only thing we know for certain is that excitement in a market like this that defies the conventions that investors count upon on a daily basis can shake the system in a way that only happens a few times in a century.
People want Tesla Motors and Elon Musk to succeed; or at least more than the people who want it to fail. Knowing this, you can expect the stock to increase or decrease however the market prefers, as it has moved beyond the impact of this or any other article you will find. The continuous positive news from Mr. Musk will keep redefining each basis for evaluating the stock we create, so why should we rely on them? While I do admit, bottom line profits and earnings are reflective of the success of a business, they aren't the sole piece of the puzzle that determines the stock's worth. They are only a piece of what excites people to buy into the business, and one that we've seen a little to much of recently, for its lack of effect on the stock price.
That my friends, is why TSLA refuses to fall when the short sellers say "fall", lose when the pundits say "lose", and fail when all the competitors and other EVs fail. It's a straight-up, good looking, American product.
One that consumers have been waiting for.
Note: I have left out all numerical evaluations, charts, and ratios. I believe the demand for this stock is now reflective of the market opinion surrounding the company as opposed to simple fundamentals.