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Could Tesla Still Be the Best EV Stock to Buy?

By Matthew Frankel, CFP® and Jason Hall - May 15, 2021 at 7:31AM

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With hundreds of other players in the electric vehicle space, is bigger still better?

Over the past few years, hundreds of new electric vehicle companies have come into the market. And most of them are a tiny fraction of the size of Tesla (TSLA 0.08%), the clear leader in the space. But could the $560 billion company still be the best way to invest in electric vehicles? In this Fool Live clip, recorded on April 28, Chief Growth Officer Anand Chokkavelu, along with contributors Matt Frankel, CFP, and Jason Hall, discuss some of Tesla's competitive advantages and whether it could still have upside potential.

Anand Chokkavelu: Now what everyone's been waiting for, Tesla with a market cap of $676 billion, which is down. Sales of $36 billion, so it's 19 times sales. We can call this the most interesting stock in the world.

Jason Hall: I think that's fair.

Chokkavelu: Not much hyperbole right?

Hall: Yeah.

Chokkavelu: Big picture, the reason we're even having this ranking is probably because of Tesla pulled the entire industry forward in a couple of decades before. Basically glorified golf carts, what electric vehicles looked like. Elon Musk figured out, "Hey, you want them to look good and you want people to want that electric vehicle as a luxury good first, you get that prestige item element." It really brought the industry forward.

At this point, and Q1 it produced and delivered about 180,000 cars. Expects 800,000 this year, that's a 50% lift from last year. Again, that's still about less than a tenth of Volkswagen, but they're getting the scale at this point, especially when we talked about a NIO or XPeng it's still 10 times larger than them. In terms of other interesting things about Tesla, we don't need to belabor it too much because it's one that we talk about a lot. If I've done my accounting right, seven straight quarters of GAAP profits.

Now, I will say there are usually some shenanigans each quarter. This quarter, there is the Tesla pre-tax profit of $533 million, but $518 million of it, so basically all of it was sales of regulatory credits to other car manufacturers. Then you had another $101 million of Bitcoin profit, but still, Musk knows what investors want. He's just a bit of a sideshow on the details and he's usually missing deadlines, things like that. He's got Twitter shenanigans wild quotes, he's hosting Saturday Night Live on two Saturdays from now May 8, but it's great PR. PR gets people to want the stock and the car. Tesla's at scale now, believe it or not, it's got $6 billion more cash than debt and with a market cap that rounds up to $1 trillion dollars. I think Jason made this point, it can finance pretty easily with equity at this point.

Hall: Yeah.

Chokkavelu: Even if it falls quite a bit, you don't have that existential angst anymore, I don't think. Sorry, TeslaQ on Twitter. 

Matt Frankel: I actually think their ability to raise capital at that valuation is probably their competitive advantage at this point. They could raise $7 billion tomorrow and dilute shareholders by 1%. That's insane. 

Chokkavelu: Exactly.

Anand Chokkavelu, CFA owns shares of Twitter. Jason Hall owns shares of Bitcoin. Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Bitcoin, NIO Inc., Tesla, and Twitter. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Tesla, Inc. Stock Quote
Tesla, Inc.
$928.70 (0.08%) $0.74
Twitter, Inc. Stock Quote
Twitter, Inc.
$44.94 (0.98%) $0.43
Nio Inc. Stock Quote
Nio Inc.
$20.86 (-2.07%) $0.44
XPeng Inc. Stock Quote
XPeng Inc.
$22.69 (-3.45%) $0.81
Bitcoin Stock Quote
$23,864.05 (-1.77%) $-431.01

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