This article was updated on November 7, 2017, and originally published on June 11th, 2017.
Tesla, Inc. (TSLA -5.59%) is one of the most controversial companies in the public market today. Bulls point out that the electric-vehicle leader is poised for massive revenue and profit growth as the world gradually weans itself off fossil fuels. Bears point out that the company is still burning through capital, and that its stock is insanely overvalued using any traditional valuation metric.
While both points of view have their merits, I personally decided to become a shareholder in 2013, after Fool co-founder David Gardner made the company a "core stock" in his Rule Breakers service. That proved to be a savvy move, as I'm currently up more than 600% on my initial investment.
Despite the incredible gains, I'm still wildly bullish on this company's future. Here's a look at 10 reasons I could easily see myself hanging on to my shares indefinitely.
Image source: Tesla.
1. Low-cost marketing
For better or worse, Tesla has a knack for making headlines. Every move Tesla makes is covered in extreme detail by the media, which provides the company with an unbelievable amount of free advertising. It also doesn't hurt that CEO Elon Musk has a cult-like following and boasts more than 14.4 million Twitter followers. All this attention makes it incredibly easy for the company to quickly get the word out when new products become available and drum up huge amounts of demand for its products (witness the 400,000 pre-orders for the Model 3). That's quite impressive for a company that spent less than $50 million on marketing, promotional and advertising costs last year.
By contrast, traditional auto manufacturers like General Motors, Ford, and Toyota still have to spend billions each year on advertising to get the word out and create demand for their products. I think that gives Tesla an enormously powerful and underappreciated advantage.
2. Ridiculously loyal consumers
Tesla's customer engagement and loyalty numbers are truly off the charts.
Consider a recent survey by Consumer Reports that ranked Tesla first among all automakers in terms of owner satisfaction. CR's data showed that a stunning 91% of Tesla owners surveyed said they would purchase the same vehicle if they had it to do all over again.. That result was 7 percentage points ahead of its next closest competitor.
Or how about the company's Net Promoter Score? According to indexnps.com, Tesla comes in first among auto brands with a net promoter score of 96. This number, which represents how often consumers would recommend a brand to others, is excellent in absolute terms and it ranks a full 12 points ahead of its closest competitor.
3. Complete control over the consumer experience
Most people I know hate the car-buying process. Being forced to haggle with a car salesman is a huge turnoff for many consumers (including me), yet plenty of car buyers begrudgingly go through the process every few years in order to get a great deal.
By contrast, Tesla decided to bypass the dealership model altogether and instead take a direct-to-consumer approach. Customers can choose either to buy online or to get help by visiting one of the company's retail stores. There's no haggling or hassle. You either buy the car or you don't.
Image source: Tesla.
By owning its own stores and service centers, Tesla has complete control over the entire consumer experience. That's a benefit no other rival automaker can match.
4. A beloved brand
Tesla hasn't even been selling products for a full decade yet (the Roadster launched in 2008), but the company has already managed to get onto Interbrand's list of top 100 global brands in 2016 (at number 100). As of last year, Interbrand estimated that the name "Tesla" is already worth $4 billion. For context, that's roughly the same value assigned to BMW's MINI brand.
5. Access to SpaceX engineers
SpaceX is another remarkable company headed up by CEO Elon Musk. The rocket maker knows a thing or two about engineering, manufacturing, and materials science. Elon Musk has admitted that he has taken techniques that were learned at SpaceX and applied them to the car business.
If you were an automaker, wouldn't you love to have access to SpaceX engineers to chat about the latest technological advances in material sciences and alloys?
6. An energized and talented workforce
Tesla is located in the heart of Silicon Valley, which means it competes heavily for engineering talent with famously generous employers like Alphabet, Apple, and Facebook. Despite the intense competition, Tesla continues to attract more than its fair share of talent from around the Bay Area. That's impressive given that the company tends to pay its workers less than those other companies.
How is Tesla able to pull this off? One reason is that the company outscores all of those other employers in one of the most important and underrated employee metrics: meaningfulness. According to PayScale, 89% of Tesla's employees feel their work is making the world a better place. That ranks second only to SpaceX and is a full 11 percentage points ahead of the next-closest tech competitor, Facebook. Having a mission that employees care deeply about goes a long way toward helping Tesla to recruit and motivate top talent.
On the other hand, there's no doubt that Tesla is a very demanding company to work for. The company's ambitions are huge, which amps up the pressure on employees to deliver. That pressure is leading to high turnover in the executive ranks, so this is an area for Tesla's bulls to watch. Still, the company continues to receive high praise from its employees, which is an advantage that shouldn't be overlooked.
7. The supercharger network
Critics of electric vehicles have long asserted that range anxiety, or the fear of running out of charge and being stranded, would prevent mass consumer adoption. Tesla is acutely aware of this issue and decided to tackle the problem head-on by investing in its own network of rapid-charging stations.
Currently, Tesla has over 5,000 Superchargers in its global network, but the company just announced its plan to double that number by year-end. What's more, the company plans on electrifying more than 15,000 of its Destination Charging connectors by the end of the year and building out larger sites along its busiest travel routes.
Image source: Tesla.
Owning such a large network of chargers provides Tesla with several advantages. First, it helps to squash the range anxiety concern and convert potential customers into owners. Second, the charging sites help to grow the awareness of Tesla's name brand and products since they are placed along well-traveled routes around the world. Finally, building out this network has cost millions and taken years, which will make it hard for competitors to catch up. While several automakers like BMW and Volkswagen have announced big plans to invest in charging networks of their own, Tesla's first-mover advantage should help it remain one step ahead.
8. The Gigafactory
Lowering the cost of batteries is an essential step toward making electric cars more affordable. To achieve this goal, Tesla has invested heavily to build out a massive Gigafactory in Sparks, Nevada. When it was announced, Tesla believed that the building's extreme economies of scale would allow it to lower the cost of batteries by about 30% by 2020. More recently, the company updated its estimate to 35%, which, if true, should give it a massive cost advantage over rivals.
On the flip side, it is also possible that the Gigafactory build-out could lead to an industrywide oversupply of batteries. If true, that could give competitors who purchase batteries on the open market the same cost advantage without any of the headaches of actually building the batteries. Still, Tesla's going to need to get its hands on a lot of batteries if it wants to meet Model 3 demand, so having full control over the supply of this critical component makes a lot of sense regardless.
9. Optionality and market opportunities galore
Optionality is a company's ability to create new products or services. It is hard for me to think of a company with more optionality than Tesla.
Even if you just stick to the auto industry, it's hard to wrap your head around this company's true potential. Beyond the Model S, Model X, and Model 3, Tesla has already announced its intentions to offer a compact SUV, a pickup truck, a heavy-duty truck, and a "high passenger-density urban transport." When adding in the potential to launch its own Uber-like service and autonomous vehicles -- not to mention servicing all of the above products -- the company's automotive potential is mind-bogglingly huge.
But we're not done yet. The above doesn't even consider the potential of personal and grid-level storage products like the Powerwall or Powerpack. It also doesn't take into account the sale of solar panels or even the new solar roof.
Just how big of a market could all of this potential add up to? An analyst at Morgan Stanley did the math and concluded that the answer was $15 trillion. For comparison, the Gross Domestic Product of the entire U.S. in 2015 was $18 trillion. Meanwhile, Tesla's total revenue in 2016 was $7 billion. Let those numbers sink in for a while.
While there are plenty of landmines ahead that make this company's stock a risky bet -- the Model 3 rollout could go awry, the company's spending plans could outstrip its ability to raise capital, competitors might finally catch up -- I think the long-term upside is large enough to compensate investors for the risk.
10. Talented leadership who's all in
No discussion about Tesla is complete without mention of its talented executive team. That discussion starts with CEO Elon Musk, who personally minted himself a fortune more than a decade ago and used that capital to fund Tesla and SpaceX. Elon could have easily decided to sip margaritas on a private island for the rest of his life, but he instead chose to invest his net worth and time to start a car and rocket company. There's no doubt in my mind that he is extremely motivated to see Tesla succeed, and since he currently owns more than 33.6 million shares of Tesla's stock -- which, at current prices, is worth more than $10 billion -- you can bet he's financially motivated as well.
Another executive I think deserves a lot of credit for turning Tesla into a success is J.B. Straubel. J.B. is a brilliant engineer who has worked at the company since day one and is currently its chief technical officer. J.B. oversees the technical and engineering design of Tesla's products (including the Gigafactory), and he currently owns about $100 million worth of Tesla's stock. He too could have retired rich years ago, but instead chooses to stick with Tesla to make it a success.
History shows that Elon and J.B. have a stellar track record at calling the shots at Tesla -- take a look at the company's share price if you're looking for proof -- which is why I feel quite comfortable investing my money right alongside these two geniuses.
In total, I certainly recognize that Telsa is a high-risk stock that is already priced for massive growth in the years ahead, but given all of the above, perhaps you'll understand why this is one stock I plan on never parting ways with.
