STOCK PICK: An Automotive Company Breaking Record After Record
This stock pick is perhaps the most disruptive company of our time led by one of the most visionary founders of all time.
Once you see a Tesla on the road, it’s hard not to start noticing them everywhere you go. I mean, who doesn’t remember a sleek-looking vehicle that’s almost silently operated that can go from 0 mph - 60 mph in under 2 seconds (1.98 seconds to be exact)? Not to mention it may be the only vehicle in existence to be floating around in outer space, escorted by none other than SpaceX.
Company Overview
Tesla, Inc. (NASDAQ: TSLA) is the designer and manufacturer of Tesla vehicles. They make money via selling their electric cars, selling automotive regulatory credits, financing and leasing services, leasing solar energy and energy storage products, and other related products and services. Tesla was founded in 2003 in Palo Alto, California. Originally founded by Martin Eberhard and Marc Tarpenning, later to be co-founded by world-famous entrepreneur Elon Musk as he took over as CEO in 2008.
Leadership
Elon Musk - aka Technoking, CEO and Director of Tesla, Inc. - is the face and reason behind the explosive growth of the all-electric automotive company. First, Elon Musk founded Zip2 Corporation, which was an online city guide, in 1995 and was later sold to Compaq in 1999 for over $330 million. Next, Musk founded X.com, a payments company that later acquired another finance company, and the two became known as PayPal, which I’m sure you’ve all heard of. Yup, Musk co-founded PayPal as well!
In 2004, Musk founded SpaceX to commercialize space travel. In 2008, Musk took over as CEO of Tesla, and in 2016 Tesla bought SolarCity, a market-leading solar energy company. In 2017, Musk started The Boring Company, which focuses on reducing street traffic by building (or “boring,” hence the name) underground tunnels for traveling.1
If that wasn't enough, Elon Musk also acquired the world-known social media platform, Twitter, and has already achieved record-breaking active users in the company's history.
Suffice it to say that Elon Musk is one of the most visionary CEOs of our time, if not of all time. A company whose CEO has the power to swing the price of a cryptocurrency by 20% with a single tweet (yes, I’m referring to DOGE coin, a cryptocurrency that was originally built as a joke and later made a lot of people wealthy, thanks to Musk) at the head of the world’s first automotive company to reach a trillion-dollar market cap (although for a moment in time), spells out a major investment opportunity for decades to come.
Mission
“Accelerating the world’s transition to sustainable energy.”2
Why Invest In Tesla?
Perhaps the better question here is, “Why shouldn’t I invest in Tesla?” Tesla has healthy financials, they have built a disruptive product that is changing an entire industry, and they have one of the most visionary CEOs of all time.
Financials
The first thing I look at when finding companies to invest in is their current financial status. Having a great product is one thing, but having healthy financials to support that product is another. Both are necessary before I’m convinced to become an investor. Tesla has a double-digit return on equity, over $22 billion in cash with only $5.57 billion in debt, and has almost $2.5 billion in levered free cash flow. Furthermore, over 13% of the company is owned by insiders and executives, which means they have some skin in the game. Here are Tesla’s financials as they currently sit as of this writing:
Return on Equity: 27.99%
Quarterly Revenue Growth (YoY): 24.4%
Total Cash: $22.4 billion
Total Debt: $5.57 billion
Levered Free Cash Flow: $2.45 billion
Insider Ownership: 13.06%
Disrupting The Automotive Industry
Even just 10 years ago, if I told you that an automotive company with a premium price tag on all-electric vehicles would surpass nearly every major automotive brand and potentially become the most prominent automotive company in the world, would you believe me? Most people would have laughed hysterically! Yet, here we are in a world where Tesla is the leading electric vehicle company in the world, taking on names such as Toyota and Ford. And Tesla is doing it by selling significantly fewer vehicles than its competition. But as a company, its valuation surpasses most, and its brand is recognized worldwide. To say that Tesla is disrupting the automotive industry is an understatement.
World-Class Product
Not long ago I was scrolling my social media feed and came across a comment from one of my long-time friends. To paraphrase, this friend had a piece of metal wedged into one of the tires of his Tesla that required attention. Meanwhile, they had to borrow their parent’s car until the Tesla tire could get fixed. Their comment was about how having to not drive a Tesla was such a significant change that she could never go back to driving a car that isn’t built by Elon Musks’ all-electric car company.
It’s these types of raving fans and customer loyalty that keep a company growing at such a fast pace. It can be seen in companies like Apple, Costco, and LuLulemon, for example. Once you convert to their world-class product, their fans are loyal and never turn back.
Visionary Leader
Not only has Elon Musk founded some of the most famous brands today - PayPal, SpaceX, Tesla, Solar City, The Boring Company - but his vision to colonize Mars is one that some might have thought was unattainable. But, with musk at the helm, it may be an attainable goal. If Tesla continues to grow with the vision that only a genuinely talented CEO can realize, then investing in Tesla may just outperform your wildest expectations as an investor.
My Opinion
If you know me, you know how I feel about my Apple products. When I think about the automotive industry, I think Tesla is to the automotive industry what Apple is to smartphones and laptops. Not just from a brand name standpoint, but from a quality of product standpoint too. Not to mention both companies follow a similar story in terms of having such visionary founders at the head of the team.