Tesla stock: bull vs bear

We believe that considering a diverse range of insights makes us better investors. Here, two contributors debate Tesla stock.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Illustration of bull and bear

Image source: Getty Images.

Bullish: Rupert Hargreaves

I think Tesla (NASDAQ: TSLA) has transformed the global automotive market over the past decade.

As demand for the company’s electric vehicles has rocketed, other vehicle manufacturers have rushed to catch up. While they are making substantial progress, none have the market reach of this market leader.

The company’s brand has almost become synonymous with electric vehicles, in much the same way Alphabet‘s Google has become synonymous with internet searches. 

In the UK, Tesla’s Model 3 is the best-selling plug-in electric vehicle this year. Sales of the car are more than four times higher than its closest competitor. 

Demand for the company’s vehicles is so high it is struggling to produce enough. This is a great problem to have. Management is looking to capitalise on this potential over the next few years by increasing production to 20m vehicles by 2030. 

This is an ambitious target. It would make the group the largest automotive producer globally. Even if Tesla can increase output to 5m vehicles a year (up from around 750k a year presently), I think the stock has tremendous potential. 

As such, I am currently happy to look past the firm’s premium stock market valuation and focus on its growth potential. 

What’s more, as the world transitions away from hydrocarbons towards green energy, the demand for its products could be even higher than initial expectations. These are the reasons why I would buy the stock for my portfolio.

Rupert Hargreaves does not own shares in Tesla.


Bearish: Cliff D’Arcy

In years to come, I will remember 2020-21 as the ‘year(s) of the meme stock’. Beaten-down stocks in various companies soared as millions of retail investors teamed up to push prices ‘to the moon’. But easily the biggest meme stock of recent years has to be Tesla. Buying the stock has produced astonishing returns since 2016 (+2,614% in five years). As I write, Tesla trades at $1,023.50, valuing the electric-car maker at over $1trn. But the shares have been even higher, peaking at $1,243.49 on 4 November.

I honestly think Tesla is a fantastic business selling futuristic products. However, TSLA is a joke stock — on fundamentals, at least. In fact, I’d argue that Tesla is one of the most overvalued stocks I’ve ever seen in 35 years of investing. Currently, it trades on a price-to-earnings ratio of 332.1 and an earnings yield of 0.3%, with no dividend yield. Therefore, for Tesla to ‘earn’ its current market value would take until the year 2353. Quite frankly, that’s insane.

Furthermore, the barely profitable Tesla is the fifth-largest US-listed company by market cap. That’s why I would never buy the stock at current price levels. But I wouldn’t be brave enough to short it, either. In summary, it is a meme stock driven by narrative, euphoria and faith. Hence, its fundamentals hardly matter to the faithful. For me, Tesla is quite simply a cult, with Elon Musk as its charismatic leader making endless promises!

Cliff D’Arcy does not own shares in Tesla.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

New virtual money concept, Gold Bitcoins
Investing Articles

Down 61%, are Argo Blockchain shares worth buying?

Argo Blockchain shares have tumbled in value. As a shareholder, Christopher Ruane considers what might come next for the business…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 UK dividend stocks with yields over 10%

These dividend stocks are the highest yielders on the UK market, says Roland Head. But how safe are these generous…

Read more »

Couple relaxing on a beach in front of a sunset
Investing Articles

I’d start buying shares for passive income with this pair

Our writer is looking to earn passive income via investing, and here are two leading stocks he might buy.

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Here’s the Shell dividend forecast through to 2024

The Shell dividend is still nearly 50% below 2019 levels. Will the oil giant use record profits to rebuild its…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

3 FTSE 100 stocks I think Warren Buffett might love!

Warren Buffett made his fortune thanks to the success of US shares. But here are three FTSE 100 stocks I…

Read more »

Bearded man writing on notepad in front of computer
Investing Articles

Down 75%, has the Deliveroo share price bottomed?

The last 12 months have been torrid for the Deliveroo share price. But does this open an opportunity to grab…

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

Is now FINALLY the time to buy Lloyds shares?

Lloyds shares have leapt in value as market confidence has improved. Should I buy the FTSE 100 bank before it…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

3 high-dividend FTSE 250 stocks to buy right now!

The London Stock Market is packed with top high-dividend stocks to buy. Here are a handful I'm considering buying, despite…

Read more »