Tesla stock is in a bull run. Investors have high hopes for Tesla stock. Tesla stock is up 21% over the last 3 months, 42% in 2017 alone and 104% from the February low of 2016. Short interest on Tesla stock is 31,352,589 shares as of 3/31/17 or roughly 19.25% of the outstanding shares. There is a significant amount of short interest, meaning some investors are bearish on Tesla. There are some investors out there betting against the Tesla rally. The Tesla response to these short investors was “We continue to be surprised at how determined some people are to dig their own graves.” Tesla has proven its ability to make attractive luxury vehicles, however the company continues to lose money year after year. Why Investors Are Betting Against Tesla Stock: 1. No profit margin. The bearish argument here is that if Tesla can’t turn a profit on a $100,000 car, how will they do it on a $45,000 car. The base price of a Model 3 is $35,000 and closer to $45,000 with options. Mark Spiegel, unofficial spokesperson for the Tesla short investors, predicts that Tesla will lose money on every Model 3 sold. Spiegel’s cost estimate based on Q4 2016 earnings is that the average selling price of the Model S and Model X was $104,000 and the production cost was $82,000. This gives Tesla a 21.2% profit margin. Even with this margin, Tesla still posted losses in 11 of the 12 last quarterly earnings reports. At a $35,000 base for the Model 3, Tesla would need to produce it for $27,580 to maintain a 21.2% profit margin. Production cost of the Model 3 vs the Model S/X would need to be cut by $54,420 or 66%. Bearish investors are skeptical of whether or not this can be done. 2. Competition in the electric vehicle market. Nearly all major auto manufacturers have announced plans to sell pure electric or plug in hybrid vehicles over the next few years. Tesla currently holds about half of the pure electric cars on the market. While the market is growing fast, as is the competition. Other auto manufacturers can cross-subsidize electric vehicles with the sale of traditional vehicles. Tesla only sells electric vehicles, so they are unable to do this. 3. Electric vehicle incentives will disappear fast. Electric car buyers can claim a $7500 tax credit on federal taxes. There is a 200,000 vehicle limit per manufacturer. After this, the incentives decline and eventually disappear after one year. Another issue is whether or not this tax credit will stay in place under the Trump administration. Tesla is hoping to produce 500,000 vehicles in 2018, meaning the incentives will dry up quick. Competitors who are nowhere near the 200,000 vehicle limit will have a significant price advantage over Tesla with the tax credit. 4. Elon Musk is spread too thin. Elon Musk is the CEO of Tesla. He also runs SpaceX, a space flight company with the ultimate mission of building a civilization on Mars. Musk is also the chairman of Solar City, now owned by Tesla. Musk is also involved in an artificial intelligence research group as well. Elon Musk recently invested in Neuralink, a brain implant company. Musk also plans on expanding into the semi-truck and bus market. Tesla bulls see this as a diverse portfolio of projects potentially worth billions. Tesla bears see this as too many distractions. Website! http://ift.tt/2hWvg0t Follow me on Twitter! https://twitter.com/RyanOScribner Facebook! http://ift.tt/2k1uEsg Snapchat! ryanoscribner Source: http://ift.tt/2oXzGKK If this video brought value to you, please leave a like! If you are looking to find out more about anything I discussed, drop me a comment or contact me on Twitter. Subscribe to be updated on my journey through life! DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. I am merely sharing my opinion with no guarantee of gains or losses on investments.
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