5 Reasons Why Tesla Is Undervalued by Stock Analysts
“Imitation is the sincerest form of flattery.”
This is not the case in business.
Increased competition is not usually welcomed.
In fact, reduced competition is one of the core attributes of the legendary investor Warren Buffett’s investing approach.
He focuses on finding companies with large moats, or competitive barriers.
One revolutionary company has not just one moat, but four. They protect it from competition.
Even as competition storms its industry, this company is in great shape thanks to these moats.
This company is set to surge by triple digits in the near future.
But many analysts are skeptical.
Warren Buffett has yet to invest in this stock.
The lack of faith has created significant volatility.
We will use this uncertainty to our advantage and pick a Buffett-like stock before everyone else rushes in.
The Leader in Electric Vehicles and Solar Power
Warren Buffett hasn’t invested in this company yet, but it’s likely on his radar.
The stock is just now stabilizing its operations and set to generate cash flow in the years to come.
As it rounds this corner, it’s a stock that you have to pay attention to.
I’m talking about Tesla (Nasdaq: TSLA), the electric vehicle and solar power company.
The company has come a long way since it launched the Tesla Model S in 2012 — the first relatively affordable all-electric vehicle in its lineup.
After seven years and two more models, we are seeing increased competition entering the all-electric space.
Porsche, Audi and Jaguar, to name a few, are planning to add major all-electric vehicles to their lineups.
While many view Tesla as just another car company, its moats prove that’s not the case.
Tesla has four competitive moats around its business that analysts seem to miss.
But it stands out amongst more established auto brands because of:
- Its global charging network.
- Its self-driving capabilities.
- Its battery Gigafactory.
- And its brand.
The first three items give Tesla a major advantage over anyone trying to enter the electric-vehicle space and compete with it.
But today, I’m going to talk about its brand.
Tesla’s brand is a game changer.
A Luxury Brand That’s Accessible to More Consumers
Many people know Tesla as a luxury brand. It’s synonymous with brands like Cadillac, Jaguar and Porsche.
Analysts don’t view this as a moat. I normally wouldn’t either.
But as the company moves ahead with its Model 3 ramp-up to appeal to more consumers, the brand appearance will be extremely attractive.
Porsche and Audi recently had to go back to the drawing board with their entry-level all-electric models after studying the Model 3 — they couldn’t turn a profit.
That speaks volumes to what Tesla can produce out of its factories.
And it translates to its higher-model cars as well.
My 10-Year Analysis: A Luxury Brand at Ford Prices
I’m a fan of Tesla but can’t bring myself to spend that much on a car … it’s just to get me from point A to point B.
When I was shopping for a car last year, I narrowed down my choices to two models.
My wife wanted a used 2015 Cadillac Escalade, and I was eyeing a brand-new Tesla Model X (the midsize SUV).
I did what any consumer would do.
I compared a price-to-own analysis of the Escalade with the Model X.
I was shocked at the results.
The total cost to own a used gas-powered Escalade and the all-electric Model X was basically the same though the Escalade was less than half the Model X — around a $50,000 difference.
I analyzed a 10-year ownership period. That’s how long you should plan to own a car if you’re not leasing it.
I considered a few factors in the analysis:
- No more oil changes with the Tesla.
- No new brakes on the Model X.
- And the Tesla uses electricity instead of gas.
The $50,000 difference in sticker price seems like a baffling amount to save over 10 years.
But, when you break it down, the difference is just $417 a month.
I drive enough to offset that in just gas, but when you think about the convenience and cost-savings of the factors I mentioned above, it adds up quickly.
Tesla has been able to brand itself as a top-of-the-line luxury vehicle maker on par with Cadillac, Jaguar and Porsche.
But its top-of-the-line models are closer in cost to Ford and Honda over a 10-year period than other luxury brands.
That’s a remarkable impact on branding. And it highlights the benefits of going all-electric versus the typical combustion engine.
So, while imitation may be the sincerest form of flattery, Tesla is ready for the competition. The other companies will go broke trying to adapt and compete.
Tesla’s a great stock to own now, and for the years to come.
Chad Shoop, CMT
Editor, Automatic Profits Alert
Chad Shoop, CMT
Editor, Automatic Profits Alert