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Has Tesla Lost Touch With Reality?

In the following video, Motley Fool industrials analyst Blake Bos takes a look at Tesla Motors' (NASDAQ: TSLA  ) current share price, and why it may be disconnected from reality. Shares of the company are up 117% year to date, with a sharp pop on earnings news after the company announced its very first profitable quarter. These increases bring the company up to a market cap larger than FIAT, and potentially only slightly smaller than Lexus would be if it were a stand-alone company. Blake compares sales for these two brands to current sales for Tesla, and shows investors what kind of already-baked-in growth Tesla's share price would have to hit in order to justify its current valuation. Finally, Blake gives his overall take on Tesla, and whether it's a buy, a hold, or a sell at today's prices.

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.

Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On May 14, 2013, at 4:53 AM, iflyjetzzz wrote:

    While it's nice that you're using fundamental analysis to value the stock, there is a short squeeze in progress. Any attempt to place a value on the stock and then state that it is currently overvalued is not wise. As of the last short interest report, 37% of the float was short.

    We're in the middle of a rip-the-shorts'-face-off rally because there are so many shorts who thought that the company would go out of business. The stock will eventually correct to a more realistic level. But not until the short interest is well below current levels. And that means that the stock will move much higher than present valuation due to the amount of short covering required.

  • Report this Comment On May 14, 2013, at 5:51 AM, cottagetrees wrote:

    There's another scenario worthy of consideration. Possibly, the stock is still severely undervalued.

    If the stock is up 117% ytd, that's only excessive if both the real underlying value of the company is less, or if the company's long term prospects have dimmed, or if the stock is ahead of itself.

    Significant risks have been removed over the last few months, and because these risks are removed, the company is arguably much more valuable today that it was six months ago. It can also now be reasonably argued that the company was severely undervalued a few months ago, given what we now know about expanding margins and increased demand.

    My guess is the company is still understating the true demand it's seeing, and we'll see increased shipment estimates in each of next few quarters.

    I've also not read any speculation about their manufacturing capacity at the old NUMI plant. My understanding is that they're only utilizing a small fraction of the capacity. This means they could ramp production significantly without having to build a new factory.

  • Report this Comment On May 14, 2013, at 7:09 AM, SteveTG3 wrote:

    I've been studying the stock for a year, and I really mean studying. I really suggest anyone who thinks there growing bigger than Lexus in the next 5-10 years is foolish study the stock. I won't tell you what to think, but I think a little study will show convince you that this is possible, significant time will give you visibility to how probable you think it is.

    As to comparison of market caps. I really think this company is about 25% automaker, 75% flagship high tech new category creator. I think people will be shocked how quickly EVs supplanting ICE cars will be a mainstream expectation. I think 5 years from now it will be as reasonable to people as the idea that you can live with a cell phone and no landline.

    So for these market cap comparisons, REMEMBER, TESLA IS TRADING AT LESS THAN ONE SIXTH THE VALUE OF FACEBOOK. Study Tesla, and think about what kind of growth in value it will have by 2025 vs. Facebook.

    I agree with other poster's points about short squeeze. Fair value may be $75 now, but given the short squeeze, there is more risk than usual that you may not have the chance to get the stock at fair value or a significant discount to f.v. now or in the next near term (i.e., $65 or less).

  • Report this Comment On May 14, 2013, at 9:50 AM, TMFMarlowe wrote:

    Like most people who invest in Tesla without really understanding its business, you guys are missing the elephant in Tesla's living room.

    The comparison to Facebook is just silly. FB isn't an industrial firm, and it isn't, and wasn't, surrounded by massive and massively-better-funded competitors waiting to eat its lunch once its market hit critical mass.

    Tesla is.

    Study Tesla, and then study the size and R&D budgets and global scale of companies like Volkswagen and GM and Nissan. And then look at what has happened to prior attempts to "disrupt" the global auto business. This ain't the internet.

    I like Tesla a lot -- as a company. Their execution has been flawless and the car is great. But if you think Tesla is going to have this market all to itself for more than a couple of years, you are truly fooling yourself. Already you can see the clouds in the distance -- and they have BMW and Audi and Cadillac and Infiniti badges on them. What does that do to your fanciful hockey-stick growth projections for Tesla?

    John Rosevear

  • Report this Comment On May 14, 2013, at 6:09 PM, gusdog581 wrote:

    Bit scared at the current prices. Bought in January @ $35+, and again last week at $56. Sold my full position today at $94+....I think Tesla will retreat to <$75 before we see $90 again, I may get back in then.

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