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I firmly believe that the best way to make money in the markets is to buy quality stocks and keep them indefinitely.
Last year, I shared 10 reasons why I invested in You're here (NASDAQ: TSLA) for the long term. However, it would be extremely easy to say that the past year has been difficult for society. Between the slower than expected increase in Model 3 production, the growing financial losses and the endless pace of pessimism of short sellers, it is hardly surprising that in a recent interview with The New York Times, Elon Musk has described it as "the most difficult and painful year of my career".
Is Tesla still a good company that is worth being held indefinitely? Let's go back to the 10 reasons I've given for the Tesla stock to be long to see if they are still in use today.
Source of the image: Tesla.
1. Low cost marketing
"I do not care what the newspapers say about me as long as they spell my name correctly" – P.T. Barnum
There is no doubt that Tesla still has the gift of capturing a crazy amount of media attention. An avalanche of articles and videos is published on the company every day. Although many of these statements are negative, I still think that all free advertising only helps to publicize Tesla's mission and products.
As a quick data point, Elon Musk had 14 million Twitter subscribers in June 2017. This number has recently exceeded 22 million. I am sure that the constant attention of the media is one of the main reasons why its popularity continues to skyrocket.
Musk also reaffirmed at Tesla's recent teleconference with investors that word-of-mouth is also continuing to create demand for the company's products:
[T]The thing we are really proud of is that the more models we deliver on the field, the more our sales increase in parallel. So, we deliver a model 3 to someone, they love it, they tell it to all their friends. Our customers are our main sales force.
Although there is a strong counterargument to argue that Musk spends too much time with the media defending his company, I still consider all advertising as a huge net gain for the company. And I continue to believe that this remains one of the biggest long-term benefits of Tesla compared to its competitors.
2. Ridiculously loyal consumers
Tesla owner satisfaction figures continue to dominate the industry. The company recently won first place Consumer reports"Owner's satisfaction survey for the third year in a row.
What's more, the company's Net Promoter Score remains an impressive 96. This is an unparalleled number among automotive brands.
3. Full control of the customer experience
Tesla is still the only major automaker to control every aspect of the customer's property experience. This allows it to offer a level of convenience and service that no other automaker can match, and to innovate in car buying and experience processes. of ownership.
For example, he recently started testing direct delivery from his new cars from the factory directly to the home or workplace of the buyer. Musk thinks this method is "definitely the future".
Tesla Mobile Service is another great example of the company's ability to offer a differentiated experience. The company says that 80% of the repairs can be done by its fleet of mobile vehicles, which is another significant benefit for homeowners.
And what about live software updates that allow cars to upgrade long after they leave the factory? Tesla recently used this feature to solve a problem with the Model 3 brake system Consumer reports had identified. A fix was created quickly and sent to the vehicles in a few days. Commenting on this reaction, Consumer reports Automotive test director Jake Fisher said, "I went to[[[[Consumer reports]For 19 years, I have tested over 1,000 cars and I have never seen a car capable of improving its track performance through an update over the air. "
I think that Tesla's decision to maintain complete control of the customer experience allows it to build brand loyalty in a way that other builders simply can not match.
4. A loved brand
The name "Tesla" gained two places on Interbrand 's list of the 100 largest global brands in 2017, ranking 98th. While the value of the brand has not changed, the name alone is worth another $ 4 billion.
In addition, Tesla was recently named the most innovative brand in the US on a list compiled by BrandZ. This particular honor probably matters a lot to Musk, since he recently stated during a call to investors that "the pace of innovation (…) is the fundamental determinant of competitiveness. ".
5. Access to SpaceX Engineers
Musk continues to run SpaceX and Tesla. While it is difficult for outsiders to judge Tesla's interest, there are reports of both companies working together to develop new materials and solve problems.
I still think this relationship will directly benefit Tesla in the long run.
6. A dynamic and talented workforce
Tesla ratings on Glassdoor have dropped slightly since a year ago. This is logical given the enormous challenges associated with the ramp-up of Model 3 production, as well as the layoffs of about 9% of the company's workforce.
As a third party, it is difficult to determine whether these events have weakened morale or deterred potential new recruits from applying. Fortunately, Tesla continues to rank very well among its employees in the "Meaning of Work" category, which I believe allows it to attract and retain top talent.
This is certainly an area that investors must watch, especially since there have been some departures of senior executives.
7. The compressor network
Tesla now has more than 11,000 Superchargers on its global network. That's twice as much as a year ago. There are also tens of thousands of billing destinations for hotels, restaurants, shopping centers, etc.
While the company's unparalleled charging network should continue to give it a leg up on consumers, there is no doubt that competition on this front is starting to increase. Other automakers themselves deploy advanced charging technologies and, in some cases, even associate them to share the costs of setting up their networks.
Although Tesla is still the leader here and will likely benefit from its first-come-first-place position, there are legitimate reasons to believe that this benefit will not last.
8. The Gigafactory
The huge Gigafactory Nevada has been producing batteries for over two years. Although the plant is still under construction, it already produces batteries at an annual rate of about 20 gigawatt hours, making it the largest battery plant in the world. In fact, Tesla already produces more batteries in kWh than all other car manufacturers combined.
It is notorious that Tesla is unobtrusive about what this huge scale represents for its costs, but Musk recently revealed at its annual meeting of shareholders that their cell-level costs are expected to fall below $ 100 per kilowatt hour later this year. year. He also thinks that two years from now, the company will exceed the magic threshold of $ 100 per kilowatt hour at the battery level.
Although Musk's deadlines should always be taken with a grain of salt, I think Tesla's scale advantage over batteries should continue to bring him significant savings. Whatever the benefit of the duration of this benefit, at least 20 new mega-battery factories are being built.
9. Optionality and market opportunities galore
Tesla's short and long-term product roadmap continues to be unique.
In the short term, its growth will continue to be fueled by the expansion of existing offerings: Model S, Model X, Model 3, Powerwall, Powerpack and Solar Roof.
In just a few years, a semi-truck, a new generation roadster, a pickup truck, a compact SUV called Model Y and a "new generation bus" will join this list.
Musk is certainly delighted with the potential of the company:
If there is a company with a better roadmap for the products, I'd like to know where it is, because we have some awesome things coming up.
In the longer term, the company plans to launch its own network of autonomous taxis and deploy autonomous truck platoons that could disrupt the taxi, carpooling and trucking industries.
What is the value of this option? It's impossible to say for the moment, but ARK Invest recently released a detailed report claiming that Tesla's shares, which are currently trading at around $ 290, could be worth up to $ 4,000 here. 2023 because of all its built-in options.
10. talented leaders who are all in
Although Musk is a polarizing character, I think even Tesla's short sellers will admit that it's extremely motivated to see the company succeed. Beyond the huge potential financial benefits – he currently holds 22% of Tesla shares outstanding and has signed a lucrative long-term compensation program entirely related to the company's performance – Musk's reputation is directly related to the success of Tesla. I think it's a huge motivation for him.
The same can be said of many other longtime Tesla leaders. CTO J.B. Staubel and CFO Deepak Ahuja hold multi-million dollar shares and could have retired a long time ago, but chose to stay at Tesla.
I love putting my money behind passionate leaders with serious skin in the game, so I still believe that Tesla is in good hands.
Reasons for caution
Despite my foresight, I am not blind to the fact that powerful counterarguments must be made about society.
On the one hand, I do not agree with his decision to forgo raising additional capital. Why drain the cash balance so low that management could easily fill its cushion with a little dilution?
I did not like the fake private head, or the way it was advertised on Twitter. I believe Musk when he says that he chose this medium in an effort of transparency, but he ended up opening a Pandora's box with the SEC.
Finally, I'm not sure that Musk's decisions to spend time with Brownlee or Joe Rogan, or during rescue operations in the Thai caves, are really the best choices, given all the bullets he has in the air. I would prefer that it remains focused on ramping up the production of Model 3 and that Tesla becomes profitable. Again, all this media exposure made him headlines, which can help the company sell more cars.
Tesla is a purchase
Overall, I acknowledge that Telsa's shares are not intended for the faint of heart and that there are legitimate reasons for shareholders to be cautious. Despite this, I still believe that the company still has many sustainable competitive advantages and that it has extremely high growth potential. That's why Tesla remains a stock I plan to never give up.
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