In this segment from Market Foolery, producer and host Mac Greer,Million Dollar Portfolio's Matt Argersinger, and Supernova and Rule Breakers' Aaron Bush dip into the Fool mailbag and find a listener confused about whyTesla (NASDAQ: TSLA) is so often reduced in people's minds to merely an automaker, given its solar-power and battery-making bona fides. And he's curious how the Fools would define it.
A full transcript follows the video.
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This video was recorded on April 19, 2017.
Mac Greer:From Brian Bosak, who writes: "Ikeep seeing headlines like this one: 'Tesla Just PassedGM to Become America's Most Valuable Carmaker.'" Brian goes on to write, "WhatI don't fully understand is whyintelligent people keep calling Tesla a carmaker when they do so much more than that. They could be a battery producer,technology company, energy company. Yet they keep getting compared,unfairly, in my opinion, toFordand [General Motors] when it comes to market cap. It feels a bit like callingApplea phone company and comparing them toMotorolainstead of Microsoft or Google. If you had to call Tesla a 'blank' company, what would you call them, and to whom would you compare them?"
Aaron Bush:I would say Tesla is a vertically integrating energy-conscious car company. It's a car company, OK?[laughs]Matt Argersinger:Withseveral big adjectives in front of it.
Bush:It's a car company. Yeah, I think,at the end of the day, it really is a car company. We were talking before, Apple is a phone company. I do think you have to look atwhat it is that they're selling,and it is cars. That said, I do think there's a danger in comparing here.I personally don't want to compare Tesla to anyone, literally anyone. My thinking here stems around the fact that there are two types of evolution. There's gradualism and there'spunctuated equilibrium. Those are fancy terms, but the latter category, which,you could say, in business-speak,those are the companies that create a new industry, or radically change an existing industry. They should not be compared to theincumbents, because the market is forward-thinkingand because they are changing the rules of the game and will look different at some point in the future. And investors who try comparing what's new with what's old, which is a classic innovator's dilemma, are going to miss out on the underlying story there.
Bush:There you go,science lesson for the day.
Greer:Itsounds like a medical condition.
Argersinger:I think Aaron nailed it on the head. I just think, for now, if Tesla isgoing to be generating 90% of its revenue,roughly, from cars, andSolarCityis getting integrated this year, it's still going to be 90% revenue from cars. Apple, some 70% revenue from phones. That's the primeproduct. Now, that can change over time. Amazon, I don't think it's fair to callAmazon a retail company anymore. Youcould have called them an online retail company five years ago, but now, because of the diversity of the business, you can call Amazon something different. But for now, where is the revenue coming from? Where is the beef made?
Greer:OK. Sorry, Brian, it sounds like, for now, still a car company.
Bush:Tesla is Tesla.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Aaron Bush owns shares of Apple and Tesla. Mac Greer owns shares of Alphabet (C shares) and Apple. Matthew Argersinger owns shares of Apple and Tesla. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Ford, and Tesla. The Motley Fool has a disclosure policy.