Can Tesla Motors Prove Itself?

Tesla's Model S was recently named "Car of the Year" by Motor Trend magazine, beating out so many of the traditional competitors, like Ford. But Tesla still has a long way to go to win over consumers as a whole. Ford however has really been on a tear lately, and has been a longtime pick of Motley Fool superinvestor David Gardner, and has soared 48.89% since he recommended it in November 2009. David specializes in identifying game-changing companies like this long before others are keen to their disruptive potential, and he helps like-minded investors profit while Wall Street catches up. I invite you to learn more about how he picks his winners with a free, personal tour of his flagship service: Supernova. Inside, you'll discover the science behind his market-trouncing returns. Just click here now for instant access.

Andrew: Hey Fools, Andrew Tonner here. I'm joined today by Brendan Byrnes, our Industrials Analyst for Fool.com.

Brendan, let's take a look at one of the most potentially disruptive stocks in the overall industrial space; Tesla. When you look at it today, what are your thoughts? Is it a buy? Is it a sell? Do you like it? Do you not?

Brendan: This is a stock that's been performing very well for the past year or so. Elon Musk, their CEO and founder, announced that they were cash flow positive in early December, definitely good news for an innovative company, a disruptor company as you mentioned.

Also, Model S getting extremely positive reviews overall. Actually, Automobile Magazine's Car of the Year in 2012, so they're doing very well with orders for the Model S.

It remains about production with the Model S. They had a few hiccups at the end of last year, but as of now all seems to be well. Production is strong, going forward. They hope to sell 20,000 Model S's by 2013, which would definitely be good news.

Then, going into 2014, expecting sales to increase another 50% on top of that, with the introduction of the Model X, which would be the SUV crossover type vehicle.

Definitely an interesting story with Tesla. It remains all about Elon Musk for me. If Elon Musk isn't the CEO and founder of this company I'm much more bearish on it, but as of right now I'm not quite willing to buy it, but I think it's a hold. It's definitely not a sell in my book.

It's close to me jumping in. I'd want it to fall back a little bit more if I were to purchase this stock. One of the things that worry me with Tesla is, you wonder if Tesla proves that it can work -- the electric vehicle -- do the big companies, Toyota, Honda, Ford, GM, with the big economies of scale, increasingly get involved in this sector, that can do it for cheaper?

Tesla does have the innovation on its side, and it is more of a first-mover right now, being electric vehicles the only thing that they do, so that definitely bodes well.

Another thing that not a ton of people are talking about, I think you have to think about with Tesla, is oil prices overall, going forward, and their impact on gas prices. We know it's incredibly tough to predict gas prices in the future, especially a couple of years out, but we are seeing somewhat of an energy revolution, especially here in the United States and Canada, with oil sands and much more oil.

Actually, one report recently from the International Energy Agency is saying that the U.S. and North America could produce more oil than Saudi Arabia by 2020. Obviously, it's a supply and demand game, so that could drive down oil prices and drive down gas prices.


Do electric cars get less attractive with cheaper gas prices and people staying with internal combustion engines? That's something you have to watch.

I think overall hybrids remain the most likely outcome going forward, as far as the mainstream once you get a decade out or so, and electric motors become even more widespread, but I think this is a stock you have to watch, mainly for Elon Musk and a tremendous car with the Model S.

They're doing everything well right now. It just remains a little bit too speculative for me to jump all in right now.

Andrew: Yeah, it's such a high reward/high risk kind of play that I can understand being at least skeptical as a long-term investor, especially a risk-averse long-term investor. Thanks for your insight, Brendan.


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  • Report this Comment On January 09, 2013, at 9:42 PM, stra6128 wrote:

    LA Times Business section today predicted higher gas prices in 2013. There have been no new refineries built in the US for 30 years - vulnerable to wear and tear, weather events, terrorism, etc. Natural gas is cheap right now - but pollutes with methane as a by-product. If we had a functional and modernized grid served by solar/wind/biofuels, etc - then electric cars become a no brainer. Tesla is leading the way in technological advances - will be niche player for the well-healed for at least the next several years. Always a potential by-out candidate. Short at your danger!

  • Report this Comment On January 09, 2013, at 10:54 PM, SleepingDog355 wrote:

    Not long ago Tesla was the subject of relentless criticism on the Motley Fool, with it's eminent demise predicted on a weekly basis. Folks who believed in the company were loony environmentalist "EVanglicals". How things have changed.

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