The One Reason Faraday Will Not Become the Next Tesla

For the first time in recent years, I missed the annual Consumer Electronics Show that was held in Las Vegas last weekend. In case you’ve never heard of this or never been, it’s the largest consumer electronics and technology tradeshow in the world that showcases over 3,800 companies.

This year, the big “reveal” was the Faraday Future FF91 electronic car. It didn’t fail to impress either, with the company securing over 64,000 pre-orders.

And this has led to some speculation that this small startup company could soon become a dominant player in the automotive industry.

In fact, some of the media pundits have already predicted Faraday becoming “the next Tesla.” But the patterns say otherwise…

Here’s why Tesla will stay number one…

Tesla Has Become “Too Big To Fail”

Faraday is an American startup tech company that has high aspirations to not only build an electronic car to rival those produced by Tesla Motors, but to be a dominant player in that space. The company’s plans include developing intelligent electric vehicles. They also have probably the most untraditional auto business model seen to date, which includes car owners subscribing to Faraday apps.

But some of the major concerns they’re facing right now include:

  • Their chief executive offices jumping ship (after a group of senior executives already bailed)
  • A significant lack of engineers
  • Millions of dollars in unpaid debt that’s led to the halting of their $1 billion Las Vegas project

All of this leads me to Tesla Motors, Inc. (TSLA)

Now I can tell you off the bat that I’m a bit bias toward Tesla. Last weekend, my wife and I took a test drive of the vehicle when were in the Tesla showroom in Sarasota, FL. Although my wife wasn’t crazy about the look of the last model, the redesigned front end changes are much more appealing. And although it seems a bit cramped upon opening the door, it’s actually very roomy when you get inside – especially with the all-glass roof.

Driving the Model S is like a dream… it’s a smooth ride once you get the hang of the energy regeneration feeling when you let off the accelerator. This car really is a piece of art. It feels like you are driving a computer on wheels that tracks every your every movement as well as the outside world’s. So my wife and I are planning on buying either the 90D or the “Fast and Furious” model, the P100D.

But there’s more to the mark Tesla’s made on the world…

Tesla is currently the only electronic car company in the world that is publicly traded. Now with Faraday Future, you might say that competition could be a good thing. But unless Faraday can get things in order and stay afloat, there won’t be any competition. Furthermore, all of the excitement over Faraday will actually help Tesla by keeping its electronic cars in the spotlight and spurring consumer interest. And if that excitement dies down, Tesla will simply continue feeding its customers’ wants and needs. This will drive sales, profits, and investor interest enough to propel Tesla’s stock price higher.

And honestly, keeping Tesla on investors’ and traders’ radars will not be that difficult. Elon Musk already owns a company that’s diversified, down to the development, construction, and sale of solar energy systems. Tesla also acquired the solar energy services company, SolarCity Corporation (NASDAQ: SCTY) for $2 billion last November. Tesla will also remain relevant and on Wall Street’s radar as it continues to work alongside the company, Space Exploration Technologies, also known as SpaceX.

Now let’s take a look at the stock’s price pattern…


As you can see in the chart above, the stock has had a one-year low around $140 price and a one-year high of almost $270. TSLA has also traded more in a range, shown by the purple box, and is currently closing in on the top of that range. Should TSLA break above that, I can see it moving to its one-year high of $270 – or even moving to $300.

So one profit opportunity you could consider as a trader is Longterm AnticiPation Securities (LEAPS). You could also go a step further and consider a LEAP bull call spread or a LEAP butterfly call spread to be more cost effective while still participating in any upward price movement of the stock. Just be sure to work with your financial professional to see if any of these strategies would be right for your portfolio.

To your continued success,

Tom Gentile

5 Responses to “The One Reason Faraday Will Not Become the Next Tesla”

  1. As a 90D owner, I say ‘Don’t do it!’. Believe me, once the glamour wears off after a couple of months and the problems start to set in, and you realize that in Florida there are very few superchargers and range is a real problem, you will have nothing but buyers remorse (like me!)
    I used to be a huge Tesla fan but not any more and if they can’t bring a better quality car to market, then they will not last against the competition coming.

  2. Hello: I have some difficulty in your recommendations based on fundamentals. TESLA is running a net deficit every quarter. It consistently loses money. How long can this company survive operating in the red year after year?

  3. I do see Tesla as a long term win. acquiring Solar City was smart because investment in solar city will begin to pay back Tesla more and more on a logarithmic scale… think of it like a 20 year mortgage that once it’s paid off will begin to pay you back and continue to rise exponentially. We are already in year 6. Tesla stock may have some ups and downs, but long term, once the numbers begin to show, the truth will be out! I agree that Tesla is too big to fail in many ways: people who want his product don’t have many places to turn, Tesla is at the forefront of setting up more and more charging stations, which other late comers to market will have to “buy into,” or create their own. The batteries are going to become more and more popular. As population grows, having back-up self-generated power will become more and more popular. The risks are, any significant setbacks hurt when you are not yet profitable, and China or another fine car company producing a viable competitor. When will the numbers be obvious? Tough question, but then it’s a little late to buy. Good strategy to buy on a correction, leap options like Tom suggest perhaps. Thx. Good article.

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