Tesla’s gigantic stock price increase in the last few months has been watched closely by the investor’s community.

There’s little doubt that the share price of Tesla – if you look at it solely as a car maker – seems very stretched, already including plenty of positive news and expectations like strong second quarter results, massiveley improved financial position of the business, the prospective inclusion into the Standard & Poors Index this year- and of course “Battery Day” which takes places late in September.

A super growth company with a very rich valuation

Early in August, I made an unusual move: I initiated a position in Tesla for the amount of roughly USD 1’500 and sold all my stocks of oil supermajor ExxonMobil afterwards.

I consider myself as long term oriented investor trying always to look at the business fundamentals. And here, I have to say, that Tesla’s financial positition changed strongly in a matter of short time. To the very positive! Tesla is so well ahead of competitors in a range of areas like battery, solar technology, automatic driving software etc. which give the company huge monetising potential.

Looking at a company like ExxonMobil, in contrast, I have to say that I view this company more sceptically than I did a few years ago. Operational results were underwhelming for quite some time, even before the COVID-19 pandemic, when oil price was between USD 55 and 65 per barrel. And now, with oil being lower for the foreseeable future, I cannot see a real trajectory towards growth. I cannot recognize any vision. A few years ago, ExxonMobil was a AAA-rated company with a perfect balance sheet which should have thrived in challenging conditions. It could have benefitted from its strong position to become the clear, undisputed oil super major leader.

But ExxonMobil got complacent. And it’s position and profit base seems to be eroding.

As a value investor I love to see low P/E ratios and high dividends with a solid balance sheet. And still, uniquely looking at the underlying business, I’d consider a position in ExxonMobil not as less risiky as in Tesla. And even with recovering oil prices, there seems to be very limited upside potential for ExxonMobil.

Yes, Tesla’s stock price looks astronomically high. And one has always to be very cautious to not overpay. But valuations can change. Share prices fluctuate. And it’s important also to look at Tesla’s underlying business, which is thriving (I’d even say businesses, as it’s not just cars). Free Cash Flow is improving. Drastically. And the company is now even sitting on a nice cash pile. Tesla’s Gigafactories will boost production. And there is clear demand for electric vehicle around the world.

Tesla is a lot more than cars. It clearly has disrupted the car industry. And it won’t stop from here.

“Tesla’s mission is to accelerate the world’s transition to sustainable energy” as the company says on its website.

It’s an immensly interesting business with a superb potential, definitively worth a look. Even for value investors. The beauty of the stock market is volatility. One can always wait and see to find an interesting entry price.

Disclaimer
You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.