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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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 assessed. 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

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

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

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »