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  • Writer's pictureIshfaaq Peerally


Another good day for the markets $SPX500 as Apple $AAPL gains 2.7% after record earnings yesterday. Today, we are awaiting Facebook $FB earnings after close. In our portfolio, there are two stocks in red today, Diageo $DGE.L as we are now days away from Brexit. Lower gold $GOLD prices sends our gold miner Polymetal stocks $POLY.L down by over 1%.

You can find my full analysis of Apple's earnings here:


Tesla $TSLA recently reached a valuation of $100 billion and there's one question on everyone's mind, is it too late to buy?

Let's look at the different scenarios:

1. Tesla is a tenbagger

It means Tesla stock will reach about $5600 in 2030. How likely is that? Well, Tesla has been diluting their shares at a fast rate (they will have to dilute their shares again to compensate Elon Musk for reaching the $100 billion valuation) and if we assume the best case scenario for Tesla, they would dilute the shares by 25% by 2030. It means Tesla would need a market cap of at least $1.25 trillion in 2030 to be a tenbagger. Let's assume Tesla will have a PE ratio of 25, this will give them $50 billions in net income in 2030. Let's not forget that right now, the company is not profitable and these are only assumptions. BMW $BMW.DE has the highest profit margin in the auto industry at 8%, let's assume Tesla can do better with a profit margin of 10%. The revenues of Tesla will be $500 billion in 2030 and if they make $60 000 per EV, the number of EV sold will be about 8.3 million, giving them 55% of market share of all the EV sold in 2030. Is it possible that they can have 55% of market share?

2. Undervalued (four bagger)

We make the same assumptions and we see that Tesla will need 22% of market share. This is more plausible. Actually, Tesla can even reach over 30% of market share since they already have 14% of market share. Does it mean we should buy Tesla right now? We need to look at the bear case before making this decision.

3. Overpriced

Tesla has a book value of $6 billion, $24 billion in revenues over the TTM and never had a profitable year. With a market cap of $100 billion, it seems overvalued. Even if Tesla is the future, paying too much for the stock can be a big risk. One risk with Tesla is that auto sales all around the world are going down and Tesla is not known to make cheap cars. Delinquencies on auto loans in the US are going up and if people can't afford to pay for their current cars, what makes you think that they are going to buy a new car, especially a Tesla? If you had invested in Tesla is 2013, you would have waited 6 years to make a considerable profit from that investment.

Everybody knew in 2000 that Microsoft $MSFT was the future and the company was already doing great but if you had invested in Microsoft in 2000, you would have waited 16 years to break even on that investment. Microsoft was certainly growing every year but investors were no longer willing to pay for an insane valuation. The same thing can happen to Tesla or to any other company. That's the stock market.

Personally, I believe that Tesla is overpriced and that it is too late to invest. You may tell me that you invested in Tesla last year and made 200% in 7 months. That's great. I didn't do that. But how likely is this going to happen again?

Nobody can predict the market. Tesla can be a tenbagger but it is very risky. So if you're going to invest in Tesla, don't make it a big portion of your portfolio. If you have 10 companies in your portfolio, 2 goes bankrupt, 7 have average returns and 1 is a tenbagger, you beat the market. But you need this diversification to ensure this.

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Here's my full analysis of Tesla:

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