FOMO Investing, the rise and rise and rise and….fall of Tesla (TSLA)

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If you haven’t been following, Tesla has had a HUGE run from a year low of $185 in May 2019 all the way up to someone paying $962 on Tuesday, February 4. Even just five days ago the stock was at $632. Like every huge, irrational jump, there is a fall. February 5th saw TSLA drop $152 in a single day. Who knows maybe it’ll jump $200 tomorrow…

As with many unwarranted jumps in price (Bitcoin anyone?), these recent ones are what I like to call FOMO investing. Like many people under 35 or so, FOMO is fear of missing out. Whether social settings, travel, material goods, younger people see what everyone else is doing on social media and feel the need to get in on the action. Same applies to Tesla. People who buy in at $400 share that they bought in 2 days ago and are now up $100 a share, that leads to others wanting to not miss out on the action. People have convinced themselves that Tesla is actually worth more than Ford and GM combined. Ford sold 2.4M vehicles in just the US, while Tesla sold 370K worldwide.

Does that mean Tesla really is worth 4x more than Ford? Yes and No.

Tesla is barely a car company, leaning more heavily on technology than transportation at the moment. Tesla has unmatched software, updates to said software, and are far ahead in the electric field than anyone else. The Model S is rumored to hit 400 miles this year, while Porsche, Mercedes, Audi, BMW are barely getting 200 miles on a charge. It’s not even close. Add in the Chinese market, which loves electric cars and Tesla is poised for strong growth and maybe even consistent profits. People who want an electric car want a Tesla. People who want a new car are probably looking very closely at the Model 3 and upcoming Model Y. Speaking of which, Tesla has improved production so quickly that the Model Y is way ahead of schedule. Can they get their truck out just as quickly? There’s a lot to look forward to. That’s how we got to $962 a share.

But why… Tesla only sold 370k vehicles worldwide, how can they be valued so high? The auto industry is stagnating, there’s definitely a limit to how many vehicles Tesla can sell. Who knows where that ceiling is. Model S and X sales are down significantly. These are high margin vehicles that will hurt the bottom line. Tesla is too busy trying to get more vehicles to market, but they seem to be ignoring their current lineup design wise. Continuous software updates definitely help.

Who knows where Tesla will go in the next few months, weeks, or even days, but man I wish I invested last year when I was considering it…

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