Today I explain why I am buying Tesla Stock. I purchased over $20k in $TSLA today. Is Tesla stock too high? Am I crazy? Maybe. I provide Tesla stock analysis and why I'm buying TSLA stock.
From Seeking Alpha: "Summary: TSLA reported a GAAP profit in Q2, and are now eligible for S&P 500 inclusion. Inclusion in the index will lead to increased institutional buying, leading to lower cost of capital. Despite the inclusion of TSLA being seemingly inevitable, the stock is tapering off. This is likely due to the insane run-up in the stock heading into the report. Buy the dip. TSLA is becoming ever-so reminiscent of AMZN, a comparison I don't make lightly. The company's disruption of multiple industries and focus on reinvesting profits expose the similarities between the two companies. TSLA bears continue to grasp at straws and move goalposts, while the one of the most innovative companies in America eviscerates their short positions. The only legitimate barrier to entry with investing in TSLA is the valuation. Rating reiterated at BUY, PT remains $1,750. Tesla's Q2 Report: Sell The News With the hype surrounding Tesla's (NASDAQ:TSLA) second quarter earnings release, it seemed hard to see the stock racing any higher. Going into the report, retail, sell-side, and buy-side expectations seemed calibrated around a GAAP profit, and inclusion into the S&P 500. Anything other than this would have been disastrous for the stock. This was reflected in options pricing going into earnings. The implied move in the stock was among the highest of companies reporting earnings, standing at ~15% in either direction. If you think about it, with all the hype and increased expectations surrounding the report, a blowout of astronomical proportions would've been required to get that 15% move to the upside. Combined with the insane run-up and being technically overbought, a bit of a pullback was overdue. Why S&P 500 Inclusion Is Such A Huge Boost While S&P 500 index inclusion is not a direct fundamental catalyst right now, it could be a catalyst for the stock (in the short-term) and for the fundamentals of the business (in the long-term). What do I mean by this? Well, considering that Tesla reported a GAAP profit of $0.50/share in the Q2 report, the company has become eligible for S&P 500 index inclusion. This inclusion will increase institutional ownership of the stock. When the company is plugged into the S&P 500, index funds and mutual funds will be forced to enter a position in Tesla. A lot of these funds are buy-and-hold investors, not traders. Thus, a large portion of Tesla's float will be bought up by massive institutional holders. Because these managers hardly alter their positions, a large portion of the float will not be traded as frequently. This will likely lead to decreased volatility, which would lower Tesla's cost of capital. Though Tesla is firmly cash flow positive, and already has $8.6 billion in cash, one final massive capital raise could allow them too supercharge (no pun intended) their expansion plans. Think about it, Tesla is still set to expand Fremont factory, the Nevada Gigafactory, Gigafactory Shanghai, Gigafactory Texas, and Gigafactory Berlin. The last of those two factories will be the largest of Tesla's factories. The creation of these plants, and the ramp to full capacity production would be benefited immensely by a large capital raise. By being included into the S&P 500 index, not only will Tesla gain a prestige by being an S&P 500 component, certain investors will likely be forced to buy Tesla stock in order to get exposure to the S&P 500 index as a whole. Increased buying pressure from large institutional investors will likely lead to higher stock in the short-term, and a less volatile one in the long-term. Lower volatility leads to a lower cost of capital, making large scale equity-based (or convertible) capital raises easier to pull off." Tesla is already 2.47% of the Nasdaq 100 $QQQ.
Disclaimer: I have been investing in the stock market for over 20 years, but I am not a financial advisor or a legal professional, and I am not providing financial or legal advice. The information provided is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs. FIRED Up Wealth and Eric Cuka do not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. Past performance is no guarantee of future results.
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