A Tesla Reality Check

Investors have flocked to Tesla Motors (NASDAQ: TSLA  ) after it reported its first-ever profit during Q1 of 2013. But whether or not the Tesla Model S sedan is a great car -- and the car mags and even Consumer Reports have written glowing reviews on the luxury electric vehicle -- putting close to a hundred grand into the car may be a better investment than buying the company's stock. At least in the near future.

Fool.com contributor Dan Radovsky explains why looking just at Tesla's first-quarter earnings is certainly no guarantee of future profit.

Tesla's plan to disrupt the global auto business has yielded spectacular results. But giant competitors are already moving to disrupt Tesla. Will the company be able to fend them off? The Motley Fool answers this question and more in our most in-depth Tesla research available. Get instant access by clicking here now.


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  • Report this Comment On May 22, 2013, at 7:33 PM, F2JP wrote:

    Thanks for your comments, but you left out a great deal of plusses.

    Increased production

    Lower costs as volume rises

    No DOE Loan to pay back

    Cancelling the DOE options

    They are projecting profits with phase out of the credits

    They tend to beat projections

    Superchargers giving FREE Long Distance Travel

    Best Loan/Lease Deals In The Business

    Accelerated Development Plan

    There Is No Vehicle That Can Compete

    There are still surprises to be announced

    This dilution will be a short lived event in the timeline, the last one was supposed to hurt and it was a non-event. "A Little Stormy In Shortyville" isn't it?

    Look where they are now, then blink for the next wave. See You At >$100.00

  • Report this Comment On May 23, 2013, at 2:06 AM, stumanhohey wrote:

    Just drove a friends Tesla Model S today. It's like the Iphone was to clam shell phones years ago. Unless you have driven a Tesla you have no idea about the user experience. It is just like that "Ah Hah!!!" moment when you first used an iPhone. Seriously.

  • Report this Comment On May 23, 2013, at 2:32 AM, Kamehamehaa wrote:

    Why do people think it's smart to compare tesla to fiat? They have nothing in common. Just because fiat sells way more cars than tesla (duh?) and is worth less should be no surprise. So what if fiat makes more money (for now)? Fiat is in no way a proper benchmark for Tesla. Fiat is the 40 year old man working a dead end job at McDonald's. Tesla is the child prodigy on the verge of graduating with a phd in kickass from the renowned ballsohard university. Who is more valuable? Please.

  • Report this Comment On May 23, 2013, at 4:15 AM, TeslaNY wrote:

    I researched the Model S like crazy, online, every YouTube vid, etc... I thought it was sick without test driving it.

    Then I was invited a couple of months ago to a test drive event in LI, NY. All I can say is AWESOME!! I didn't think a car could be that amazing.

    Anybody that is even remotely interested in a luxury high performance sedan (gas or electric) has to drive this car!!! My family got to drive one too that day & we still can't stop talking about it!!

    In the beginning, I wasn't even looking for an electric car. I was looking for something along the lines of a used BMW M5 or CTS-V when I came across Model S. Hands down, this car is the most amazing car I've ever driven!!!

  • Report this Comment On May 23, 2013, at 9:01 AM, XMFDRadovsky wrote:

    Remember, this isn't about how good or bad the car itself is; it is about how good Tesla is as an investment.

    To decide that, it helps to look at the company's filings and try to evaluate the financials objectively, not pick and choose whatever calculations put the company in the best possible light.

    Part of that that means using GAAP (generally accepted accounting principles) calculations to figure out the actual bottom line. And remember, the quarterly filings are unaudited. The audited earnings statements come out with the 10-Ks.

    The ZEV credit revenue has been an important part of Tesla's revenue stream, but as more and more car makers are entering the electric world, that ZEV credit market will vaporize.

    Also, if the electric car market really takes off, those tax incentives that make such an expensive car as the Model S look a little more affordable, will dissipate too. Or just plain old political motivations may make them go away as local and state governments, as well as the federal government, have to make hard revenue decisions.

    As far as Tesla-to-Fiat comparisons abound, I think that's fair. Fiat is a company with a worldwide presence with the following brands: Fiat, Lancia, Alfa Romeo, Chrysler, Jeep, Abarth, Ferrari and Maserati.

    Tesla is not in the same weight division as Fiat, yet has a 25% lead in market cap. That's not because what the company is; it's because of what its stockholders want it to be.

    Really, if someone asked you if they should invest in Tesla now at such a high price, could you really say "buy" with a clear conscience?

    Thanks for watching,

    Dan

  • Report this Comment On May 23, 2013, at 11:18 AM, SteveTG3 wrote:

    Tesla's CEO Elon Musk directly addressed the need to be profitable without relying on ZEV credits.

    He said in no uncertain terms that Tesla will have a 25% gross margin without ZEV credits by the end of Q4.

    As to recommending the stock at $90, fair point, I basically agree. What I've suggested to friends who ask me about the stock... at $90 if you just want to "take a taste", i.e. put in a small portion of what you really want to invest in Tesla in in case there's no pullback, go ahead and do it. As to investing a substantial amount of your money, I suggest you hope for a pullback so you avoid having an average price over $75 on a large position.

  • Report this Comment On May 23, 2013, at 11:29 AM, F2JP wrote:

    That would depend on how much they had to invest.

    YES, I will get back in now.

    And I will still make more money.

  • Report this Comment On May 23, 2013, at 11:37 AM, F2JP wrote:

    Dan:

    I think you are oversimplifying Tesla’s place in the auto manufacturing environment.

    Tesla has got where they are now, not just because anyone wants them to be there.

    Tesla motors started with a plan. Yes, the plan was bold and it required significant outside investment, backing and support.

    The Tesla motors plan certainly had risk and that risk attracted many naysayers who bet against their success. The level of short interest also played a role in what their price and market cap are today.

    From what I can see the shorts still have not really learned their lesson so no doubt they will continue to play a role in accelerating the growth of Tesla’s market cap.

    Tesla motors has step by step achieved the milestones of their plan. They didn’t just achieve them they overachieved them. The model S is nothing short of revolutionary vehicle that clearly illustrates Tesla motors ability to deliver.

    Beyond just producing an amazing automobile Tesla motors has created an entirely new buying experience which the public has embraced wholeheartedly.

    If that weren’t enough, they conceived of, and are building out a charging infrastructure that will provide free long distance travel forever for Tesla owners.

    Tesla Motors has also developed financing packages that go beyond anything the industry has seen before.

    The market is rewarding Tesla for their ability to deliver above and beyond what the automobile industry has ever been willing or able to deliver in the past, with the understanding that they will continue to exceed expectations.

    The market expects Tesla Motors to continue to succeed. The market also understands the significant growth potential that will be realized when Tesla Motors does succeed.

    This is what distinguishes Tesla from the other car manufacturers. It is not fair to Fiat to compare them to Tesla motors.

    Tesla has leadership that can quickly assess their situation and distinguish an opportunity that they didn’t see coming. They can solve problems creatively on-the-fly.

    Tesla has now solved several problems with one move.

    They no longer have to make the loan payments which saves them working capital and adds to their bottom line.

    They no longer have to honor the warrants which are canceled, which saves them money and adds to their bottom line.

    They eliminated two of the naysayers’ biggest gripes; that taxpayers were floating their company, and that they wouldn’t be able to pay off the loan and that they would go under owing the balance of the loan.

    They eliminated another of the naysayers’ biggest gripes; that they didn’t have sufficient cash and would run out soon.

    They eliminated yet another of the naysayers’ biggest gripes; that they wouldn’t have the money they needed to ramp up production further.

    They eliminated another of the naysayers’ biggest gripes; that they wouldn’t have the money to develop the model X and bring it to market.

    They did, however add one more gripe for the naysayers:

    They changed their mind. Boo-hoo, they are so evil, they changed their mind. LOL

    The thing that really chafes the shorts is that they played a big role in financing, at their expense, this bold move.

    Give Elon Musk a few days, what do you think he’s going to come up with next? We already know that there is a supercharger announcement coming. Will he enhance that announcement making it even sweeter?

    Will he come up with more ideas that will further distinguish Tesla from the other car manufacturers, and let us know about them in future announcements?

    Will Elon Musk announce that they are increasing their Model S production for this year?

    Will Tesla use some of this money to advance their battery technology at a faster rate than previously planned? Will we soon see 400 or 500 mile range?

    Will they accelerate the development timeline for the Model X and the Gen 3?

    Will they announce yet other models such as Pickup Trucks, Vans, Flatbeds, and Buses?

    Will they develop a plan to produce complementary products such as:

    Electric Scooters for kids

    Electric Snowmobiles

    Electric Jet Skis

    Electric Boats

    Electric ATVs

    Electric Bicycles?

    How about Electric Power Tools

    Electric Landscaping Equipment?

    I’ll bet anyone buying a Model S, or any of their other vehicles, when they’re produced, would rather buy any of these other products from Tesla than any other manufacturer. Tesla Motors' innovation and insistence on high quality would take each of these products beyond their present state of development just like they did with Model S and the passenger automobile. Hint, Hint……

    Will Tesla use this opportunity to build out their brand far beyond the scope of passenger vehicles?

    Will the Tesla Motors Brand truly become A Household Name?

    Shorts Beware!!!!!

  • Report this Comment On May 23, 2013, at 2:48 PM, jamesPeartree wrote:

    Dan, I find your point well developed. And I agree with you on future moves to add value to that stock. When TSLA starts acquisitions on a larger scale, they could go with less-know high quality developers using similar electric tech in other transportation modes, give them the visibility and sales they deserve. I am thinking of the internationally active Regen Nautic (www.regennautic.com) in the electric boat business, and even electric planes like Yuneec (www.yuneec.com). Merging of advanced co-developers almost always has a multiplying effect.

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