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Mr. No Nonsense
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My name is James and I work full time and trade part time. I'm completely self taught when it comes to investing and trading. I read anything I can get my hands on and learn from the best and most expensive teacher of all - the market.
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  • Tesla - Is The Model S A Mirage?

    Bull or bear, when it comes to Tesla's (NASDAQ:TSLA) stock, either you love it, hate it or love to hate it; but which side has it right? To answer this question, we need to assess how successful the company's products will be - namely the Model S, Model X and Model E.

    Tesla's current Model S has been a success so far but let's first look at why. The base price of a Model S is around $70,000, but according to an analyst at Jefferies & Co., the average selling price of a Model S is over $90,000. Logically, this tells us that the people buying these cars are not buying them because they are concerned about paying over $3 per gallon at the pump and unless for some unknown reason the wealthy have taken a concerted interest in the environment; I doubt they are buying these cars because they share Elon Musk's vision of emission free travel either. So let's face it, aside from environmentally conscience California residents, most people are buying this car because it is essentially a poor man's Ferrari. You get the same looks and attention as a Ferrari owner while saving a few hundred grand. In addition, the fact that the Model S is 100% electric adds to the mystique while distinguishing it much like a Ferrari equipped with a V12 engine. If you ask me, Tesla has found a nice little niche and I think the success of the Model S can continue for some time.

    As for the Model X, I don't see how the addition of this model is going to attract new buyers - unless there is pent-up demand for electric SUV's that I'm not aware of. It seems more likely that the buyers of the Model X will be from the same customer pool as the Model S. So essentially Tesla has created an additional model for their customers, however, this model will not create additional customers for Tesla. If anything, I think the Model X may offset demand for the Model S.

    Now, let's discuss the affordable and highly anticipated mass market Model E. First of all, the masses don't embrace products that require compromise. I have asked regular folks what they think of electric vehicles and the typical concerns they raise are:

    1. Finding a place to charge the vehicle on long trips

    2. Lengthy charge times

    3. Increased electric bills (even though gas savings should more than offset this cost)

    4. Battery life span and replacement costs

    5. Scarcity of charging stations

    The simple fact is that all of the above concerns are valid and $35,000 - the projected base price of a Model E, is still a lot of money to spend on a vehicle that requires compromise. In addition, unless Tesla puts a supercharger station in every town and rest stop across the country, they are not going to rid people of range anxiety.

    The bottom line when it comes to the Model E is that electric vehicles are still not practical for the masses. Take the Chevy Volt for instance, it has nice styling, is roughly the same price as the Model E is projected to cost and can be used as a purely electric vehicle. In addition, the Volt has a gasoline generator to extend range and eliminate range anxiety. You would think that having the best electric and gasoline has to offer would make the Volt a hit, yet surprisingly sales have been described as less than stellar. Now, if a car that can be run on either gasoline or electricity was not embraced by the masses, why would they embrace a purely electric vehicle?

    It has become evident that the success of the Model S has deluded everyone into thinking that a more affordable Tesla will sell that much more. However, when you consider the real reason people are buying the Model S, as I explained earlier, and take into account the compromises that come with owning an electric vehicle, it becomes clear that the success of the Model S will not necessarily translate to the Model E.

    Finally, let's discuss the stock. With the Model X not being much of a catalyst and the Model E being a potential disappointment, what is the play on Tesla? Well, considering everything I just pointed out, right now the play is still to be long Tesla. Tesla's stock is all about perception and that perception has fed the rally in Tesla thus far. Additionally, since the company has met or exceeded every expectation to this point, investors will continue to give Tesla the benefit of the doubt until they prove otherwise. This means that with the Model E still several years away, the current bullish perception can persist.

    On the contrary, if you are looking to take a short position in Tesla, I don't think now is the right time. However, a few years from now - after all the current shorts have been long since squeezed out, everything I have laid out regarding the Model X and Model E will setup a profitable short opportunity and spark an epic drop in share price that most won't see coming.

    Good luck to all investors and traders!

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TSLA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Tags: TSLA, long-ideas
    Jan 29 3:26 PM | Link | 10 Comments
  • Tesla Model E Will NOT Appeal To Masses

    Firstly, I think we all agree that most of Tesla's success is predicated on the success of the "affordable" model E that will be sold to the masses. In this article I will use simple logic to explain the reasons why the Model E will surprise everyone with its lack of success.

    First and foremost what people are failing to account for is that "the masses" don't ever want to compromise and they certainly don't care about electric vehicles or Tesla's great story. I have asked average people and the first things they say when I mention electric vehicles is "where would I plug it in on a long trip?" and "won't that raise my electric bill?" and "they take forever to charge". As much as I hate to admit, the general public is not ready to embrace electric vehicles. Tesla will more than likely be a niche luxury automaker for quite some time and this reality will set in slowly and be reflected in the share price over time.

    Now, in order for electric vehicles to be embraced by the masses several things need to happen first:

    1 - Electric cars need to be as cheap as or cheaper than regular cars because price matters most to the general public

    2 - Charging stations need to be everywhere to eliminate range anxiety, not just Tesla's off the beaten trail super chargers

    3 - Range needs to be as much as a full tank of gas

    4 - Gas needs to go up to over $7 per gallon because prices this high will force people to look for gasoline alternatives

    The bottom line is that the masses will only embrace something if it is to their benefit and there are still far too many compromises involved in owning an electric vehicle, which is why at least 3 of the 4 items on my above list must come to pass first. You don't have to take my word for it though, just ask the average person what they think about electric cars and listen for yourself.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Dec 17 5:45 PM | Link | Comment!
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