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No. of Recommendations: 5
Tesla is a growth company that's worth investing in. That said, there's a probability its best, explosive growth phase in the *stock* are behind it...

Based on the "S" curve growth model, I don't think so. It's too early to be past the "explosive growth phase." I'd start to think about it when EVs have half the car market. Some simple maths:

Tesla will make 500,000 cars in 2020
Tesla has 20% of the current EV market making the uptake 2.5 million EVs
World wide car production is 100 million cars annually
EV market share, 2.5%

Sales of electric cars topped 2.1 million globally in 2019, surpassing 2018 – already a record year – to boost the stock to 7.2 million electric cars.

https://www.iea.org/reports/global-ev-outlook-2020

50% market share is 50 million cars. 20% of 50 million is 10 million cars. When Tesla is selling 10 million cars it's time to start selling TSLA! ;)


Another way to look at it. It was only in 2020 that EVs "crossed the chasm." That happens very early in the technology adoption lifetime cycle [TALC] which reinforces the "S" curve argument.

https://softwaretimes.com/pics/talc-800.png

from https://www.business-to-you.com/crossing-the-chasm-technolog...

The TALC curve shows the crossing at around 15% market penetration but with EVs it seems to be much earlier at just 2.5% market penetration. The explanation I've come up with is that the resistance to motor vehicles was overcome 100 yeas ago and much of the infrastructure is in place unlike when Henry Ford created the assembly line. Now the resistance is only to the new "fuel."


... as it is a manufacturing company and a car company at that.

Tesla has three manufacturing divisions, cars, energy storage, and solar roofs. Cars are making a transition to self driving and the software component is huge, the reason I dubbed Tesla a Laptop on Wheels. Like Apple, Tesla is making it's own chip that runs the car.

Also, EVs are much simpler than ICE cars to the point that parts suppliers are hurting.

Continental warns of price to livelihoods in electric car transition

Leading parts supplier decries speed of change while putting 30,000 jobs at risk

“An electric car has a lower employment density than a conventional car,” said Ms Reinhart, who oversees the company’s 230,000 staff.

Continental, one of the world’s largest car suppliers, has warned the transition to electric vehicles is happening too rapidly and at the expense of people’s livelihoods.


https://www.ft.com/content/fbfe9eeb-ebc3-47ff-ad43-82bbb500a...

Technology is deflationary and EVs are a poster child! By this cost advantage, at this growth stage, Tesla can not just compete with ICE but do it while earning much higher gross margins. On top of that, the no-dealer business model improves profitability even more.

Tesla has so much going for it that it's mind blowing.


That said, there can be a large drop in share price at any time and our investing strategy must be provisioned accordingly.


Denny Schlesinger
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