NEW YORK (Real Money) -- When I say, "It's a cult stock, don't bet against it," I mean that a cult stock is a wily, cunning animal that can't be captured by the normal short-selling hunters, and it can give long-owning thrill seekers the ride of their lives.
Tesla (TSLA - Get Report) is the definition of a cult stock. It is the kind of stock that, as a hedge fund manager, I most feared betting against -- and, yes, I notice that our esteemed colleague Doug Kass is doing just that -- because the manager of the stock, Elon Musk, is not only brilliant at building a great car but at building a great stock, too.
Consider every single box he checked in the quarterly statement:
- Higher sales than expected.
- Higher gross margins than expected.
- Raising the forecast of cars to be sold and revenues for 2014.
- Raising gross-margin guidance for 2014 because of economies of scale (think Henry Ford).
- Aggressive expansion in China and Europe -- after the downturn of the latter.
Now consider all the objections Musk answered, including those from the ridiculous ancient Sell recommendations, like Bank of America Merrill Lynch's $65 target:
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- Musk guaranteed the price of the used cars. Now it looks like used cars are maintaining or increasing in value.
- There were worries about the cost of batteries, but we are told to stay tuned because of a major reduction in the cost of battery production.
- Can the batteries be mass-produced? That has been a concern. Now he's talking about a "giga factory" that can make batteries not just for Tesla but for the whole solar industry. Why doubt a guy who has the very successful SolarCity (SCTY) sister company?
- Is Tesla really catching on in China? Of course it is, Musk points out, because those stores are the busiest in the chain. Oh, and unlike Starbucks (SBUX), he's not charging more for cars in China than in the U.S.
- Can you really drive across the country, especially in the cold? Darn it all, you bet you can, and Musk has not one but two examples of people who have done it, including a citizen who is unaffiliated with the company!
- No, Tesla will not follow the other car companies into charging "excessive" prices to customers in certain markets because that would be "inconsistent with building long-term loyalty."
- No, Musk won't need more cash because the operating cash flow is positive, so there's no new equity offering for shorts to cover with in the immediate future.