Why I’m Short on my Favorite Company

Elon Musk

As a millennial, I am a huge fanatic of Tesla’s business. The concept of electric, self-driving cars is appealing for so many reasons: reducing fossil fuels, increasing driving performance, and inspiring technological innovation. That said, short one of my favorite companies, TSLA, trading around $215.

This idea is purely based upon Tesla’s seemingly-insurmountable production challenge that it plans to overcome by late 2017. A company that has built about 50,000 cars in its 13 year history, plans to increase that figure ten-fold in the next 18 months. 10X…

Tesla has announced that it is ahead of schedule in constructing the Gigafactory, the largest footprint facility on the planet. The Gigafactory will enable the company to mass-produce their lithium-ion batteries for a significantly lower cost. This is an attractive concept, however it is simply such a tall task that I predict the company will struggle to meet its deadlines.

Just look at the previous records. Tesla was late in producing the roadster as well as Models S and X; it is hard to see them accomplishing the most ambitious manufacturing ramp-up that the automotive industry has ever seen.

PO: $160. Once TSLA hits this level (or actually starts producing the Model 3), look to phase two of the 18-month plan:

Go long. When Tesla announced the Model 3, Elon Musk woke the next morning to over 200,000 reserve requests. A week later? 400,000. Keep in mind, gas prices are low, and were especially low (below $40/bbl) in late March, when this announcement took place. This means that there is tremendous demand for a viable electric car, regardless of low gas prices. People want to drive something efficient, sporty, and affordable. The Model 3 meets those three criteria in unparalleled ways, and the car will be very successful when it actually comes to market. This product will have a similar impact to the iPhone; it will revolutionize our expectations for automotive transport. The stock should behave accordingly in the long term.


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