Tesla's stock split should be a game-over moment for Wall Street bears

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Last week, Tesla announced a 5-for-1 stock split, setting off a 20% rally for shares that were already at vertigo-inducing levels.

For bulls, it was a buying opportunity.

For bears, it was more bad news.

And for anyone wondering why Tesla is worth more than GM, Ford, FCA, and the VW Group combined, it was an education in how a negative thesis about a company can steadily fall apart.

A fundamental assessment of Tesla's business does not yield a $300-billion company. But a fundamental analysis of General Motors doesn't add up to $40-billion market-cap company, when you consider that has an enterprise value of $130 billion and has been posting an annual profit of about $10 billion every year since 2015. It's obvious that Tesla is currently wildly overvalued, while the entire traditional auto industry, which had been racking up pretty routine profits, pre-pandemic, is wildly undervalued.

Welcome to the parallel universe! It exists because the facts on the ground are indisputable. Tesla is indeed valued at stratospheric levels by investors, who think the company is either a great bet on an electrified transportation future — or a great place to park money in a low-yield world. And Tesla has indeed produced far fewer vehicles and generated far less revenue than its old-school competition.

But long-term, the shorts have been screwed. Tesla has returned better than 6,700% since its 2010 IPO. It hasn't just beaten the market. It has created its own, alternative market, where the familiar rules don't apply and 20% gains come out of nowhere.

Clearly, Tesla is a stock that's fueled by a narrative, and by Musk's charisma, and by a historical moment when there's a lot of money sloshing around in search of market-beating returns. But that's not parallel-universe thinking.

In the alternative reality of Tesla — which isn't an alternative because we're really living in it — people both love the product and love the brand. That's what the elevated stock price, so out of whack with the business, represents. And that's why it game-over for the bears.

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