Has Musk spread himself too thinly?
Tesla outperformed the auto industry handily last year as its innovation and nimbleness helped it deal with issues such as global component shortages and logistics problems better than any of its competitors. This drove it to a record US$3.5b profit for the fourth quarter of the year.
But Tesla’s astronomical market cap (approximately US$1.4t at time of writing, or more than its five biggest rivals combined) is based on the anticipation of Tesla’s future, rather than historical, performance.
Investors are betting that Tesla will become the biggest, most profitable car (and, possibly, robotics) company ever.
You’d have to think twice before betting against Musk given his track record and prodigious work ethic, but is it practical to believe that he can drive Tesla to four to five times the size of Toyota while simultaneously saving humanity (via SpaceX) and democracy (via Twitter)?
I don’t think so, particularly given how Tesla is quickly losing its head start in the electric car market. A Tesla vehicle just isn’t as desirable as it once was given how many excellent alternatives there are on the market, and more and more appearing all the time.
I suspect Tesla’s share price will experience a significant correction and will come back down to earth over time.
This will reduce Tesla’s ability to make huge investments in factories and new products that we’ve seen over the past few years, further limiting its ability to stay ahead of the electric vehicle pack.
And I suspect that Musk will continue to collect shiny new obsessions as they continue to catch his eye.
This is a problem for Tesla and SpaceX – companies that he’s made in his image and that are huge, but still in the formative years.
If Musk continues to spread himself thinner and thinner then surely this will have a negative impact on the growth potential of these, and possibly other Muskrelated companies.
Will he still have time to save the world?
Damian Funnell is contactable at damian.funnell@choicetechnology. co.nz.