Tesla, a tiny automaker with less than 1% global market share that lost $862 million dollars in 2019, has become one of the top ten most valuable US stocks, reaching a market cap of about half a trillion. Investors now believe it is more valuable than Toyota. New Constructs CEO David Trainer bring some sanity to this discussion.
Whatever best-case scenario you want to paint for what Tesla’s going to do – whether they’re going to produce 30 million cars within the next 10 years, and get in the insurance business and have the same high margins as Toyota, the most efficient car company with scale of all-time – even if you do believe all that is true, the stock price is still implying that profits are going to be even bigger than that.
Tesla trades at 159 times forward earnings. Stock splits do not change anything. Tesla’s stock split is just getting the last of the suckers to buy into the party. David Trainer continues:
We think this is a big, big – one of the biggest of all time – houses of cards that’s getting ready to fold.
If Tesla was to go up another 500% as it has since March, it would make it the most valuable company in the world.
Let us look at the chart and see if technical analysis can shed some light.
The above chart shows a classic blow off top. Additionally, I have gotten at least a half dozen calls and texts about Tesla.
I have said this elsewhere but it bears a repeat.
There are three components to every top.
1- It has gone parabolic.
2- Everyone is talking about it.
3- There is mass stupidity at the top.
If you ever invest in anything memorize these three points. Get a tattoo on your chest backwards if needed. Look in the mirror. Ask yourself the three points above in a question format.
Has it gone parabolic?
Is everyone talking about it?
Is there mass stupidity?
Yes, Yes and Yes.