What’s Next for Tesla Inc (NASDAQ: TSLA) Shareholders in 2018?
Tesla Inc (NASDAQ: TSLA) shareholders have had a rough ride since the company’s founding in 2003 to date. Given that the company went public in June 2010 and has never returned a profit to date, investors should trade carefully when investing in the company going into 2018.
Tesla has been making losses since its founding in 2003.
The company’s high valuation is driven by investors who believe in Elon Musk.
The company is likely to be overtaken by other automakers such as Ford and GM.
Tesla has consistently defied common investment principles given that most investors would steer clear of a company that has never made a profit in 14 years of operation. The company also has a massive debt burden, which is further compounded by the company’s cash-burning operations, leading to the company’s constant need to raise capital.
The question on my mind is for how long investors will continue pouring cash into a loss-making entity, which constantly misses its own deadlines for bringing new products into the market. The company’s stock price has rallied to highs of over $300 from its IPO price of just $17 in 2010.
Tesla’s current valuation of $53.21 billion is slightly higher than Ford Motor Company’s (NYSE: F) valuation of $52.43 billion. The company’s market capitalization is quite close to that of General Motors Company (NYSE: GM) despite the fact that both GM and Ford are much larger and more profitable automakers.
The main reason behind Tesla’s expensive valuation is that most of its shareholders believe in the company’s vision as articulated by its founder and CEO Elon Musk. It is evident that investors keep pouring money into the loss-making company due to the charismatic nature of its CEO whom they believe has the ability to create innovative products that will make the company profitable in future.
However, I propose that Elon Musk does not have the necessary skills to make Tesla profitable despite being a visionary and a serial inventor, which means that the company needs new management for it to become profitable. Furthermore, given that other automakers such as GM and Ford have started producing electric vehicles on a large scale, it is just a matter of time before these more efficient companies overtake Tesla.
Tesla’s shareholders should push for a change in the company’s management to get more experienced executives running the company, which could increase the company’s chances of becoming profitable. In the meantime, other automakers such as GM and Ford might be better investment choices in 2018 for investors in the automobile industry.
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