In the recent steep decline of the stock market, many high fliers got hit the worst. Here’s an analysis of three and if now is a good time to invest in them.
Tesla
Tesla is attempting to be the first successful US automotive company since Chrysler’s founding in 1925. Tesla’s differentiation is that they are at the forefront of electric car innovation and are selling direct without dealers. They have a very loyal following and are targeting the high-end where all the money is made. However, this all takes a huge upfront investment that has not yet paid out. To date Tesla has raised nearly $5 billion and spent the bulk of that. They continue to bleed cash and post large losses with a stock price declining from $286 last year to under $160 now. Bob Lutz, a former executive at Ford and GM, believes they are doomed as they will not be able to finance the huge investment needed to sell cars without dealers, build-out charging stations across the country, and complete the $5 billion “giga” factory to make their own batteries.
So why should you consider this stock now?
Tesla is a game changer and it takes huge amounts of capital to win. Witness Amazon that invested tens of billions and finally enjoyed a 122% return last year. Jeff Bezos ignored the naysayers and now has the 6th most valuable company in the world. I believe Tesla will be the 800-pound gorilla over the next 20 years. Elon Musk is a patient visionary believing that technological advances, much of it software, will change how we think about cars. While others are coming out with electric cars, I believe this race has already been won since Tesla has the best designers and no one is even close to where Tesla is today. Plus, I believe Americans would prefer to buy American cars, everything being equal (which hasn’t been the case for decades).
While Tesla may still trade lower over the next year, this is one to watch and consider as a long-term investment.
Twitter
Popular with social media users, Twitter has struggled to gain advertising revenue similar to Facebook and Google, largely due to its limited 140 character “tweet” format. Unlike these companies, it posts massive losses and burns cash. It went public in 2013, quickly hit $80, traded as high as $53 in 2015, but now trades around $15. Twitter’s CEO is Jack Dorsey who is also the CEO of Square, another technology company losing lots of money. His management skills have been questioned and Twitter recently experienced an exodus of executives.
My analysis is that Twitter will continue to be challenged with high costs and slow growth in advertising revenue. Mr. Dorsey has shown to be incapable of running one yet alone two public companies. Enjoy using the product but stay away from the stock until they figure out a viable business model and hire a CEO interested in running one profitable company.
GoPro
GoPro is famous for inventing rugged compact cameras used by adventure seekers. The cameras enjoyed immediate success and the stock hit a high of $87, last year traded as high as $65 but now is under $10 after posting disappointing growth. To bolster demand, the company slashed prices and went into a deep cost cutting mode. Competitors are looming and the “cool factor” may have waned.
GoPro’s current valuation is compelling and in my opinion worth a look. They are profitable and do still own the segment. They have ample cash on hand, no debt and should be able to weather the storm.
With any investment decision I encourage you to discuss this with your investment advisor and CPA to see if this is suitable for you. Of the above, I recently bought GoPro and am looking pretty hard at Tesla with its new low price.
Ray Link is a CPA and holds an MBA from the Wharton School. He recently retired from FEI Company (NASDAQ: FEIC) where he was the CFO for 10 years. He is on the on the Board of Directors of Cascade Microtech (NASDAQ: CSCD), Electro Scientific Industries (NASDAQ: ESIO) and nLight Photonics.
Scott 
Hi Tim, I’m one of the ROWM you met in Argentina and I enjoyed our conversations after dinner about climate change and various political topics about which we seemed to be at polar opposites. It probably wouldn’t be appropriate for me to go into some of the more descriptive language in this forum.
Suffice it to say I applaud any efforts to enhance our environment and reduce pollution in whatever form and there are major concerns. However, I do take issue with some of your statements about my position on global warming, climate change as you prefer. We have had several ice ages after which the was warming. Our glaciers have been receding for the last 15,000 years and sea levels have risen to the extent that at one point Florida was considerably higher and wider and at another time it was nearly a part of the ocean. The north polar area was tropical at one time which explains the huge amount of hydrocarbons under the tundra. You totally misstated that anyone at the table said that it would wipe out mankind. “Mad Max” scenario.
Most people realize there is climate change and there may be some influence by man but the natural cycle has far greater impact than man and mankind will never halt the cycle. Your next volcanic eruption in the Northwest will have more impact than all the solar cells you can create.
I am not pessimistic about the future because mankind will adapt to whatever happens with the exception of an asteroid hitting earth. I have always believed that the negative influence of man is overpopulation because it exploits every resource from water to food production to fuels needed to maintain the human condition.
My state,NJ, has had more pollution than most but it is getting cleaned up gradually. Now they are proposing wind farms 12 miles off the coast as far south as Virginia. Three billion dollars is the cost but the result will be far less power than the nuclear power plant at Oyster Creek which is due to close. Morris County is on the hook for $18 million because of a failed solar boondoggle. There are close to 100 acres of thick pine forest about to be leveled in our pine barrens for a field of solar panels because some wackos forgot that trees are a major consumer of CO2 and so it goes with clearing land for biofuels everywhere.
Don’t you think there is a little hypocritical thinking when the ROWNs fly around in there private planes, live in Al Gore mansions, drive big gas guzzlers, small ships and power boats? They expect everyone else to conserve. Companies rape the government backed funds in the name of green energy and fail leaving billions in losses.Unless and until technology develops more efficient and economical alternatives we can’t kill our economy by limiting our fossil fuels alone. There is a basic distrust amongst many people that we are being lead by zealots with a world view that is anti-business,anti-capitalist (which you are ) and against America. We don’t always do the right thing but we are essential to some semblance of stability in the world both economically and socially.
Just to clarify, myself and other conservatives are also true conservationists and my source of knowledge is not just Fox News. I read Scientific America as well as many other sources and even watch CNN to see their slant. The problem is the general media is so in the tank with this administration a lot of truth is never told. Finally our local paper covered the crook Senator Mendendez who has no qualms about taking private jets to the Dominican Republic and receiving tons of money.
Where was the media when one of Obama’s 37 czars was Cass Sundstein, an academic who thinks fishing and hunting should be outlawed because animals have rights or Van Jones an avowed communist and racist.
I won’t go on and on about our differences but I don’t like to be categorized as a ROWM. You can call me Old that is accurate, Man yes. As far as I know mine and others have mitochondrial DNA that originated in Africa, so call me Person, OPM to be exact.
For your edification check out Dr. Spencer Wells and his research throughout the history of man. As a former research scientist I think he did great work.
Hope your “One Fly” goes well and Martin survived Buenos Aires.
Hi Jed – thanks for the post – and I am happy to refer to you as a OPM or just Jed…
So you make some interesting points – but I think they just reinforce my post. It would be wonderful to think that man plays such in insignificant role in global warming – as it would negate our responsibility – but science just doesn’t support such a position – just as science doesn’t support so much of the conservative agenda. Denying facts doesn’t make them go away.
Those that know me would be very surprised to hear me referred to as anti-capitalist. Over the last thirty years I have started many companies that have employed thousands of people and generated billions of dollars in capital. And being a capitalist – I think Al Gore should be able to live in a mansion (by the way – his mansion is green powered as are many of my properties). Gore has primarily made his fortune investing in green companies – because he is smart enough to realize they are the future – certainly not the old-school energy companies that are the recipients of government welfare.
But my point…… we need to put aside the arguments about the origins of the problem, and instead concentrate on fixing it.