Tesla Inc Stock Is a Dip Buy for Sure, Here's Why

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Under-promise and over-deliver. That is usually a recipe for success for companies on Wall Street. Management sets beatable expectations. The company then comes out and smashes those expectations. Analysts go, “Wow”. Estimates come up. Upgrades flood in. Investors buy in packs. The stock heads higher. Tesla Inc (NASDAQ:TSLA) seems to have flipped this script on its head in the hope that TSLA stock will follow.

As opposed to under-promising and over-delivering, Elon Musk and co. consistently over-promise and under-deliver. And yet, it works for the company. Over the past year, TSLA stock is up 60% versus a 23% gain for the S&P 500.

Why? Multiple reasons (it is a cult stock with an avid fan-base, Elon Musk is looked at by many as a visionary, and the company is attacking tomorrow’s biggest markets), none of which disappeared after the company’s botched third quarter earnings report.

Some of them may have lost their luster, which is why the stock is trading below $300 for the first time since May. But with time, they will appear shiny again, and TSLA stock will bounce back.

The Bull Is Stronger Than the Bear

TSLA stock is perhaps the most polarizing stock on Wall Street. The bear thesis is pretty strong. It is a money-losing operation that keeps pushing off the prospect of sustained profitability. It is a car company that is trading at nearly 5-times sales (other major car companies trade well under 1-times sales). Competition is coming up in a big way. The whole industry might lose a massive tailwind if federal tax credits for electric vehicles in the US get slashed (look at what happened to EV sales in Georgia when that state cut its $5,000 EV tax credit in June 2015).

Plus, Model 3 ramp is disappointingly slow.

But the bull thesis is even stronger.

Yes, it is a money-losing operation, but most hyper-growth stories are money-losing operations. At scale, TSLA could generate huge profits.

TSLA stock does trade at a huge premium to other car companies, but sales at other car companies are (at best) inching up by a few percent a year. TSLA is expected to experience sales growth of 70% in each of the next two years.

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