A fork in the road for Tesla

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

When the involvement of the world’s richest man is the best explanation for the unusual valuation of a car manufacturer, Nazi salutes by Tesla’s “technoking” take the brand association into new territory.

Elon Musk twice threw what, to much of the internet, had the appearance of Sieg Heils at a rally for Donald Trump’s inauguration on Monday that the entrepreneur called “a fork in the road of human civilisation”.

With his support for far-right politicians in Europe, and transformation of Twitter into a safe space for extreme views, Musk is acting like some sort of dank propagandist for the meme age. The question for this finance blog is merely what that means for the $1.4tn market capitalisation of Tesla, rather than, say, humanity.

As an investment, the “Tesla-financial complex” has long been the tail wagging the stock market dog, due to the enormous option market trading that makes it much more than just shares in a car company.

Owning them is perhaps best seen as a bet that Musk will one day deliver self-driving cars and robotaxis, or put an Optimusbot in every house. Or simply that the glorious tech-boom will continue.

Yet unlike bitcoin, gold, or other vibes-based investments there is a real company in there involved in the business of persuading consumers to hand over large sums of money for desirable objects. One which, when Tesla announces full year results next week, is not expected to be trading particularly well.

Tesla annual sales are forecast to tick up moderately to $99.6bn, from $96.8bn in 2023, in a year when the number of units shifted actually fell. Competition, particularly in China, is rampant, while prices for electronic vehicles are falling.

A valuation of more than 12 times projected sales is too rich for much of Wall Street, with Tesla that extremely rare stock where a minority of analysts are buyers: Bloomberg lists 28 buy recommendations, against 17 holds and 14 sellers.

So while we suspect most short sellers gave up thinking about the stock years ago (please do share your thesis if you haven’t), it does seem that selling cars to generate cash in the present will remain important to reaching whatever incredible future the Technoking has in mind for his company.

Maybe the days when buying a Tesla was a statement about the climate, or embracing a positive future, are long gone. Maybe the share price is impervious to financial gravity. Maybe car buyers won’t care about what is already being called the “salute hoax”.

If investors do start to worry that Musk could become more associated with white power than clean power, however, from $1.4tn it’s an awfully long way down.

Further reading:
— Putting a price on Tesla post Musk (FTAV)
— Tesla’s Q1 is going to be a wreck. Will anyone care? (FTAV, 2024)
— Tesla is nuts, will it ever crash? (FTAV, 2020)