Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup
  • Dick Young’s Safe America

What does the Smart Money think of Tesla?

October 26, 2017 By Jeremy Jones, CFA

Tesla has become the largest auto-maker in America as measured by market capitalization even though it produces a small fraction of the cars that General Motors produces. Tesla produced about 84,000 cars last year. General Motors produced over 10 million.

Yup, I know, Tesla is different than the other U.S. auto makers. Tesla is a growth stock. You hear it from the analysts whose banks regularly underwrite securities for Tesla that Tesla has a cult following. It is more like Apple than General Motors.

That’s possible, but do you want to invest your money in a company that is burning cash at a rate of over $2.5 billion per year to ramp up production for a mass market electric car?

Stock market investors don’t seem to care, but in the bond market where the downside is often many multiples of the upside, investors are becoming weary of Tesla’s cash burn.

The WSJ reports here that a Tesla bond issued only 10 days ago at par has already dropped more than 2%.

Tesla Inc.’s TSLA -2.76% first bonds have fallen more than 2% in price since their issuance 10 days ago, the latest sign of Wall Street’s ambivalence over the electric-car maker’s prospects.

The Palo Alto, Calif., company sold $1.8 billion of low-rated bonds on Aug. 11 to help pay for the Model 3, its first mass-market car. Tesla took advantage of investors’ thirst for higher-yielding securities, selling debt at an annual yield of 5.3%—more than 3 percentage points above comparable Treasurys.

But many investors sat out the deal, questioning the wisdom of buying bonds from a company that hasn’t turned an annual profit and is drastically increasing its spending in a bid to break into the capital-intensive auto market.

Read more here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Tesla Wants its Money Back
  • Could a Startup Beat Tesla to the Semi Market?
  • This Chart Has a Concerning Look
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #10 in CNBC's 2019 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • Which Fossil Fuel Wins in a Shift to Renewables? - March 4, 2021
  • Depositors in Europe Now Being Charged by Banks - March 2, 2021
  • This Is When Things Get Interesting in Currency and Bond Markets - March 1, 2021

Search Young Research

Most Popular

  • Welcome to the Interest Rate Prediction Business, JACK!
  • Democrats Have a Plan: Don't Get Too Attached to Your Capital Gains
  • Teaching A Family Investment: Warren Buffett’s Annual Letter and You
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • Bubble in Tech Stocks Will Cause "Clean Out" in Markets
  • Richard Young Reports: The Great Money Explosion and Disasters
  • The Power of a Compound Interest Table
  • Joel Kotkin: Economic Civil War
  • The Highest Yielding S&P 500 Stocks
  • Depositors in Europe Now Being Charged by Banks

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Hidden Agenda: Bill Gates’s Ulterior Motives
  • Does the Left Think Black Kids Are Too Dumb to Learn Math?
  • Secession: Impossible? Not if You Think Locally
  • RIP Bunny Wailer
  • Richard C. Young: How About Joining Us in Key West
  • The Preposterous Fabrication from the Biden Administration
  • Richard Young Reports: The Great Money Explosion and Disasters
  • Oh, the Thinks You Can Think
  • Here’s What the Media Won’t Tell You About Bill Gates
  • One of My Favorite Talks from CPAC 2021

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2021 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.