The Teslarians Strike Back!


Tesla (TSLA) has been on a wild ride including jumping 20% in the last three days.

Tesla is a stock that engenders a sort of religious devotion that can be hard to understand on one hand while on the other hand drawing repeated attacks for being a total scam (I am not calling it a scam but do a search on Twitter and you'll find plenty of people who believe it is a scam).

If you do some research you will see it burns a tremendous amount of cash, its bonds have been downgraded and there have been issues with production. There was also that bizarre April Fools tweet about being "totally bankrupt" which I would say shows bad judgment because if it fooled anyone in to selling stock or debt, that would seem to be very problematic.

The bull case seems to focus on how important the technology is and the extent to which the company can revolutionize everything about transportation. Forgetting the threat of competition that already exists and that the technology has a good chance of being commoditized like other revolutionary tech, what you're buying here is a lot of volatility, more than might make sense for something that does face a long list of threats, a longer list than many other companies with this type of volatility. Arguably there is volatility in the firm's leadership as evidenced by the April Fools tweet.

With so much emotion in the stock on both sides of the trade I would argue that it is just unnecessary to own a stock like this. Whatever the opportunity turns out to be, it can be found elsewhere without the burn rate and competition from better financed companies.