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3 Reasons Why Even Skeptics are Turning Bullish on Tesla (TSLA)

Last Updated September 23, 2020 1:23 PM
Joseph Young
Last Updated September 23, 2020 1:23 PM
  • Skeptics of Tesla have turned bullish on the electric car manufacturer.
  • Tesla has matured in 2019, operating more like a traditional automotive company.
  • It’s already too far ahead of the pack in the electric car market, no other company comes close.

The market cap of Tesla (NASDAQ:TSLA) has surpassed the $60 billion mark, supported by the rising popularity of the newly released Cybertruck. The firm’s turnaround  has even led skeptics to turn bullish.

Up until October, Tesla was criticized for being a little bit too different from traditional automakers in the way the company handles conferences, earnings and other crucial aspects of the business.

As the company evolved, and so did its market cap, high profile investors like Jim Cramer and Pierre Feragu started to believe that Tesla is now far ahead  of the automotive industry. Three reasons support that claim.

1. Highly innovative

Tesla has stood out from its competitors since its inception. The public’s reception of its newest products like the Cybertruck  have changed the mind of investors who previously thought such products would only appeal to a niche market.

Jim Cramer, host of CNBC’s Mad Money, said that he was blown away by the demand for the Cybertruck . With an improving balance sheet, beloved CEO in Elon Musk, and an active following, Cramer said that Tesla has all signs of a great company:

Even better, on that last conference call, he revealed his true rigor without the sardonic quips. Musk, it turns out, is a great CEO when he can get out of his own way, and that seems to be what he’s doing. Cult product? Check. Sound balance sheet? Check. Charismatic Leader? Check. If you’re going to invest in a battleground stock, Tesla’s got all the ingredients of a winner.

So far, 250,000 orders for the Cybertruck have been made. That’s equivalent to $25 million in revenue once the cars ship.

2. Weak business segments improving

Strategists have identified a weak balance sheet and  unorthodox approach to business as Tesla’s main weaknesses.

Up until early 2019, Tesla was criticized for using too much debt. In January, CNBC reported  that the firm’s $920 million debt placed a large portion of its cash at risk.

As fears of a cash crunch intensified, Tesla’s stock dipped 12.5%  in a poor first quarter.

Tesla recovered strongly in subsequent months , especially in the last quarter with solid earnings.

tesla stock
Tesla stock completes impressive recovery to end 2019 with a net gain. | Source: Yahoo Finance

The improvement in the firm’s balance sheet  and growing stability, which were seen as the missing links for the company, have been a driving factor of Tesla’s projected strong end to the year.

3. Dominance of Tesla in the electric car market

Reports have shown that Tesla has long dominated the European electric car market . The Model 3 easily surpassed Renault’s Zoe, Nissan Leaf, and the BMW i3 to solidify its position as the most popular electric car in Europe in September.

In late October, Cleantechnica reported that 42,999 Model 3s were sold in the third quarter of 2019. That is more than every other electric car in the U.S. market combined. Simply put, no other electric car maker comes close.

tesla sales
Tesla dominates the U.S. electric car market | Source: Cleantechnica.com

I think nobody’s close, to be honest. Tesla introduced into the market the Model S seven years ago, and today, in what manufacturers have on the road or have announced, nothing is matching the 2012 Tesla Model S. And the Model S of Tesla today is actually 40% better than seven years ago, Pierre Ferragu, analyst at New Street Research, said .

With almost 85% of the U.S. electric car market in its pocket, Tesla is entering 2020 on a strong foot.