Longtime Tesla (NASDAQ:TSLA) critic Jim Cramer has become a true believer in the electric car maker. In an article published on Real Money, the Mad Money host explained the three main reasons he’s been converted.
While Cramer has tried to maintain a neutral stance on Tesla, his bearish side could get too harsh at times. In his article on Real Money, Cramer revealed the inner thought processes of a longtime TSLA critic. The Mad Money host described his journey from somewhat neutral Tesla skeptic to TSLA true believer.
Cramer started the article by explaining the three lenses he looks through when assessing a company’s worth. First, there is the product itself, which he described as sometimes having a cult-like following. People who love a product usually feel confident enough to invest in the company as well, he explained.
THIS IS NOT A DRILL. @ElonMusk's favorite 'simulation' @JimCramer explains what brought him to the $TSLA bull camp...and why $NFLX is now a different story https://t.co/ALTgYL9nAQ
— TheStreet (@TheStreet) December 11, 2019
The second lens zones in on the company’s balance sheet. This particular sense was the reason Cramer maintained his skeptical stance on Tesla, even after having a “fantastic ride” in a Model X with his wife.
Lastly, there is the leader of a company—the third lens. Cramer’s relationship with Elon Musk has been rough, to say the least. In the article, however, the Mad Money host’s assessment of Tesla’s CEO almost seemed like a compliment.
Cramer called Elon Musk a “walking charisma machine” who was “alternately entertaining and fun-loving.” He also said that Musk was “critical to the point of scathing,” which Cramer admitted was very much similar to himself.
Cramer’s TSLA Conversion Journey
Jim Cramer’s conversion happened in three parts. Based on his description, his Tesla journey started with his daughter and wife. Cramer’s daughter, who he described as not much of a car person, had bought a Model 3 after selling her used Ford.
His daughter was initially worried about the all-electric sedan’s battery and range. After the first 100 miles with the Model 3, however, Cramer’s daughter called him gushing about Tesla’s sedan. Based on his descriptions, the features his daughter liked most about the Model 3 are probably the same features modern car owners like best about all Tesla cars. She particularly mentioned her Model 3’s wide screen and flatulence button to Cramer.
After his daughter, Cramer’s wife was the next biggest influence in his thoughts about Tesla’s products. Mrs. Cramer has somehow convinced her husband to take a test drive in a Model X. He’d ridden in a Tesla before but not the company’s all-electric SUV.
@elonmusk Had a fantastic ride
— Jim Cramer (@jimcramer) November 25, 2019
in the Model X(not my first but first with this model) and now my wife insists we buy!
After the test drive in the Model X, Cramer’s wife put her foot down and decided to buy the vehicle—with or without his approval. Although, Cramer himself was convinced by the Model X. Thus, Tesla’s products earned Cramer’s favor.
Next came the biggest issue Cramer had with Tesla: its balance sheet. After news broke that Cramer would be buying a Model X, many in the Tesla Community were shocked to find that he was still skeptical about the company because of its balance sheet.
For some, the company’s Grade-A products were enough proof that Tesla was financially stable and could grow to be more profitable. As Cramer eloquently explained in his article, however, an analyst doesn’t just look at the company’s product.
In terms of Tesla’s finances, Cramer focused on two things: the company’s balance sheet and its solar panel acquisition. Surprisingly, Cramer was quickly convinced that Tesla’s balance sheet was quite strong. He went to the most skeptical CFO he knew who told him that Tesla could “make two billion in a heartbeat,” which was enough to quell his reservations about TSLA’s balance sheet.
More positive than negative.. but not as bullish as i am on TESLA! https://t.co/kxBu5dvRf3
— Jim Cramer (@jimcramer) December 11, 2019
As for the automaker’s solar panel acquisition, Mrs. Cramer was once again the persuading figure. She gave her husband an article that revealed that Tesla’s solar roof tiles were cheap, as in Cramer’s words, “the stupid kind.”
Side note: Cramer’s wife also loved Tesla’s solar panel roof, and their family home will be fitted with them soon.
The last factor in Cramer’s conversion was Tesla CEO Elon Musk, who already seemed to grow on the Mad Money host. He was impressed by Musk’s behavior during Tesla’s 2019 Q3 earnings call. The way Musk handled the call convinced Cramer that Tesla’s CEO would have no problem negotiating with foreign authorities for Gigafactory 3 and 4.
Why Cramer Became a True Believer
In the end, three factors contributed to Cramer’s conversion into a Tesla true believer, similar to the way he assesses a company’s worth. First, there is the influence of people already in the Tesla community or those who were willing to give the company a chance. Cramer’s daughter and wife covered this factor.
Just In: Jim Cramer, a long-time $TSLA bear, has announced officially he’s enough conviction to be a true believer in #Tesla, following the footsteps of Kevin O’Leary & Andrew Left. More zealous converts needed😂For full view, click https://t.co/Q0pr0U2sx8. @elonmusk Credit: CNBC pic.twitter.com/I1f3Q3u9gs
— Ray4️⃣Tesla⚡️🚘☀️🔋 (@ray4tesla) December 12, 2019
The second factor that contributed to his change of heart was accurate information, which was provided by the skeptical CEO and his wife. Cramer’s cynical stance on Tesla’s balance sheet was easily changed when he was told accurate information about the company’s finances from a trusted source. The same happened with his wife and Tesla’s solar roof panels.
The third factor was Elon Musk. Many people in the Tesla Community joined simply because of Musk and his eccentric behavior. In the end, even Cramer himself couldn’t resist the charisma of the bold, risk-taking Tesla CEO.
Featured Image Credit: Tulane Public Relations/Wikimedia Commons
