3 Reasons Tesla Stock Will Hit a New High in 2013

Tesla Motors (NASDAQ: TSLA  ) continues to prove its critics wrong, one milestone after another. Last year, the company delivered its all-electric Model S ahead of schedule, won Motor Trend's 2013 Car of the Year, ramped up production, and launched a U.S. Supercharger Network. Tesla rode this momentum into 2013, and now expects to post its first profit when the company reports earnings on May 8. Tesla stock is up more than 50% year to date because of all the upbeat news. However, with Tesla's stock trading around $50 a share, some investors worry that it's too late to get in on the action.

Here are three reasons why Tesla stock should move higher from here.

1. Tesla is a disruptive force in the auto industry
Tesla Motors is a disruptive innovator that's bent on forever changing not only the way we drive, but also the way we buy cars. Unlike traditional car manufacturers, such as Ford or General Motors, Tesla doesn't sell its cars through franchised dealerships. Instead, the company's retail strategy relies on mall stores located in high foot-traffic areas.

Not surprisingly, pushing for change in an industry that's operated the same way for more than 100 years hasn't been easy for Tesla. Auto-dealer groups in states such as New York and Massachusetts brought lawsuits against Tesla, saying that it violated state franchise laws. Tesla fought back, and won.

As it stands, Tesla has won the right to operate its manufacturer-owned stores in more than eight U.S. states. Tesla stock should get a meaningful boost if the company can win over the state of Texas in the coming months.

2. The stock's current valuation is deceiving
There's no shortage of investors betting against the company. In fact, as of this writing, Tesla stock has a short interest of more than 42%. For comparison, less than 2% of Ford's stock is currently sold short. Meanwhile, even GM's short float of 12% looks good next to Tesla stock. Nevertheless, this could end up working to Tesla's advantage in the case of a short squeeze.

Additionally, many would-be Tesla investors argue that the stock is overvalued compared to other automakers, such as Ford or General Motors. This isn't without merit if you're simply looking at the numbers. However, as an upstart growth stock, I'd be worried if Tesla's valuation were comparable to these traditional auto companies.

It's a mistake to value Tesla using the short-term benchmarks reserved for established auto companies. Conversely, investors who are willing to take a long-term approach to valuing Tesla stock will have the most to gain when the naysayers buy in down the road -- particularly, if Musk delivers on his promise of making Tesla the greatest automaker of the 21st century.

The lesson here is: Don't judge a stock by its valuation alone. Finding winning investments is about more than numbers. It is equally important to understand the business behind those numbers. In Tesla's case, I think it is one of the most misunderstood stocks on the Nasdaq. However, this will change in time as the company continues to exceed expectations, and that's when longtime shareholders will be rewarded.

3. Visionary leadership at its best
Thanks to Apple's Steve Jobs, the world has seen what visionary leadership can do for a company. Tesla's CEO Elon Musk is no exception. Musk has a proven track record of success, including co-founding PayPal, which, in 2002, was purchased by eBay for a cool $1.5 billion. More recently, Musk made history when his company SpaceX launched the first commercial spacecraft to reach the International Space Station. Not to mention, SpaceX locked down a $1.6 billion contract with NASA, in the process.

While transforming U.S. space travel is certainly remarkable, what Musk has achieved with Tesla is equally impressive. With Musk at the helm, Tesla has overcome insurmountable odds as a start-up electric car company trying to succeed in an industry where economies of scale favor the traditional automakers. If history is any indication, Musk knows how to build and run a successful business.

It isn't everyday that you find CEOs, such as Jobs or Musk, with the vision to revolutionize entire industries. For this reason, I plan to own Tesla stock well into the future, and certainly for as long as Musk remains at the top. Patient investors should buy Tesla stock while they still can, as I suspect this is just the beginning of a very promising growth story.

Near-faultless execution has led Tesla Motors to the brink of success, but the road ahead remains a hard one. Despite progress, a looming question remains: Will Tesla be able to fend off its big-name competitors? The Motley Fool answers this question and more in our most in-depth Tesla research available for smart investors like you. Thousands have already claimed their own premium ticker coverage, and you can gain instant access to your own by clicking here now.


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  • Report this Comment On April 25, 2013, at 10:02 PM, bearsnsox wrote:

    wow, do they let 5 year olds make arguments on this site?

    seriously, 1. they have stores, 2, dont trust valuations 3, they have a good ceo

    holy hell, this might be the worst article ive ever read

    you have not gotten into one item that would make anyone buy this stock

    1. they have a ton of competition,hybrids, electric cars, its a 100k car with a 100 year payback against a lexus luxury hybrid....yikes thats a bad argument

    2. if they hit their numbers their valuation is actually good, you should look into it, the 42% short is people betting that they wont hit their growth projections because of competition, margin rates....you must be a communications major who just partied through college or a high school kid

    3. totally different industry, much more competition, many more obstacles, such a small market now, the ultra rich, because even the upper class will not buy a car with such a payback period

    horrible, i cant believe motley fool published this

  • Report this Comment On April 25, 2013, at 11:07 PM, RussellL wrote:

    1. Tesla's competition are not hybrids or any electric car. It's large luxury cars like the Audi A8, BMW 7 Series, Lexus or Mercedes S Class.

    Tesla sold 4,750 Model S in the 1st quarter. Audi, BMW, Lexus and Mercedes only sold 1,462, 2,338, 2,860 and 3,077 respectively.

    2. "Tesla stock is up more than 50% year to date because of all the upbeat news."

    Whoever is shorting it is losing money.

    3. You obviously haven't noticed, but each successive model Tesla builds, is more affordable than the previous. Their next car will be priced in the $30k range.

  • Report this Comment On April 25, 2013, at 11:18 PM, bearsnsox wrote:

    hahaha everyone wants the new toy when it comes out, its competition are hybrids, once the first wave of the rich buy a tesla no one else will want one, give it a year and the bookings will tank

    tesla stock is up because its volume is next to zero, what is the average volume 200k a day? its not a serious stock, its speculative and its like going to a casino and putting your money on red, its betting on a crazy growth rate

    when a 30k electric car comes out with a good range that beats the volt or leaf or cmax, then we will all treat it as a legit company, but that will not happen at their 25% margin rate tesla wants, they can probably do it at a 2.5% margin rate, which would bring the stock price back to the industry average of around 15 P/E and bring the stock price down to around $30

    do your valuation, if the bookings continue at 40% growth then yes the stock will grow and it should grow, but realistically its a start up and they will have the growth for a few quarters since millionaires will want a new toy that their friends dont have to brag about it, but its not a practical car and it will fail until they do come out with the 30k car, but sadly they will not survive long enough to see that come out

  • Report this Comment On April 26, 2013, at 10:15 AM, AgeOfRobots wrote:

    I agree with russelllee especially about the shorts losing money.

    There is a lot of anger out there about the success of Tesla usually coming from the short money that is banking on the company's failure. But Tesla just has the audacity to keep succeeding!

    Elon Musk may just be that sort of visionary leader that is able to disrupt an industry filled with entrenched players.

    I am long on Tesla.

  • Report this Comment On April 26, 2013, at 10:21 AM, bearsnsox wrote:

    hes a good ceo no doubt about it, but the longs have to realize that this is a very risky stock one way or the other, the initial wave of orders are based up a lot of rich people wanting a new toy, whether or not tesla can keep the interest up is the big question everyone is betting on

    not to mention their lofty margin rate goals

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