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At its $411.5 billion market cap as of Tuesday’s close and a 111x forward price-to-earnings multiple, TSLA is larger than about 97% of its peers in the S&P 500. It is also one of the index’s most expensive large-cap stocks. Apart from this, TSLA is notoriously volatile, with the company’s daily average stock movements being higher than the S&P 500’s ten largest companies. Yet for Gordon, even this volatility is not reason enough to bet against Tesla.
The veteran trader noted that TSLA is a bit like a “hero’s story,” with the company getting bolstered by the failings of other automakers in the EV transition. Tesla’s sale of environmental regulatory credits has proven to be a pretty notable source of revenue for the company, for example, with the electric car maker raking in $428 million in Q2 and $397 million in Q3. Gordon noted that this makes fighting against Tesla similar to fighting the Fed—it’s a struggle against something that won’t buckle.
“They’re selling these credits to the traditional gas-guzzlers. I kind of view it … like fighting the Fed. It’s like saying the stock market rally isn’t going to continue because the Fed’s behind it. You’re sort of fighting the same force that won’t be defeated. So, I like it. I’m long. I’ll continue to stay long,” Gordon said.
What is remarkable is that Tesla’s ramp as a company is only just beginning. While the company’s EV business is flourishing, its energy division is only just hitting its stride. Tesla’s projects in autonomy are also yet to be fully rolled out, and the company’s potential role as a battery and drivetrain supplier to other OEMs is yet to be explored. Once these are accounted for, Tesla’s size today may very well be just a fraction of its true potential.
Tesla shares have climbed about 428% year-to-date, thanks in part to the company’s continued capability to show a profit and the relatively smooth rollout of the Model Y. Projects such as Giga Berlin and Gigafactory Texas are also proceeding seemingly without any major issues. Tesla’s China division has shown strength this year as well, with Gigafactory Shanghai exporting some of its vehicles to Europe in its first year of operations.
As of writing, Tesla stock is trading at 2.23% at $451.42 per share.
Disclosure: I am long TSLA.