Is Tesla Motors Really Worth $100 a Share?


Tesla's award-winning Model S. Photo credit: Tesla Motors

Can Tesla Motors (NASDAQ: TSLA  ) really make it in the automotive mass market?

It's the question that haunts (or that should be haunting) current and potential Tesla investors. Tesla has already achieved big things, designing and building a great electric luxury sedan in the Model S, pictured above. It has also proven that it can sell enough of them to turn a profit.

It's true that so far the profit has been tiny, and the economic conditions in the U.S. quite favorable, but still: That's an enormous achievement.

But it's another big leap from there to becoming a mass-market carmaker – but it's a leap Tesla will have to make to justify anything like its current stock market valuation.

Can Tesla do it?

A closer look at Tesla's real mass-market plan
Tesla has never made a secret of the fact that its ambition has been to enter the mass market all along. CEO Elon Musk reiterated that plan in an interview with Bloomberg last week.

In that interview, Musk said that Tesla was working toward a vehicle that would be "half the price" of the Model S, would have a range of about 200 miles, and would come to market in "3 to 4" years.

The Model S starts  at $69,900, not counting a $7,500 federal tax credit, and can be optioned up to a bit over $100,000. So at half of that price we're still talking something that's priced more like a BMW (NASDAQOTH: BAMXF  ) 3-Series than a truly mass-market compact car.

Tesla has already proven that it has a knack for upscale styling and for the details that matter to luxury-sport-sedan buyers. It's not a big mental leap to imagine a baby Tesla that delivers Model-S-like performance and luxury in a 3-Series-sized package, with a 200-mile range and a starting price around $35,000-$40,000.

It's also easy to imagine that Tesla, which will see its street cred burnished by more glowing reviews as it rolls the Model S out in Europe and Asia later over the next year or so, will be in a good position to sell a fair number of those compact sedans.

Buyers will continue to worry about the lack of recharging stations, but 200 miles' worth of range is enough for just about anyone to get to work and back home with plenty of extra electrons in the tank.

Long story short, it could do well for them. Or maybe we should say well enough? But how well?

The two big questions facing Tesla's hopes for mass-market volume
There are two big questions here, and we don't have easy answers to them yet. But the answers that suggest themselves should be troubling to Tesla investors.

First, will Tesla need to build more factories? It's a big question because car factories are expensive investments, both up-front and on an ongoing basis.

An all-new factory with all the relevant tooling for an assembly line or two could cost a billion dollars. That's just the beginning, because every factory adds to ongoing fixed costs, costs that Tesla – with just one factory so far, and that acquired on the cheap – has been able to contain so far.

The greater Tesla's fixed costs, the more cars it has to sell just to break even, no matter what the economy is doing. So far, the relatively strong U.S. economy has been very favorable for the Model S, but that won't last forever – and as Tesla expands globally, it becomes vulnerable to economic headwinds elsewhere, just like any other major automaker.

Fortunately for Tesla, its current factory is a big one, built originally for a joint venture between Toyota (NYSE: TM  ) and General Motors (NYSE: GM  ) . During the days of that joint venture, the factory was said to have an annual capacity of around half a million vehicles. Tesla should be able to ramp up to somewhere in that neighborhood without adding a facility.

That's a lot of Teslas. But even maxing out its current factory may be a challenge for the company.

Tesla is surrounded by huge potential competitors
The second question is one that some observers have been asking all along: What happens to Tesla's market if and when competitors enter it? Right now, Tesla doesn't have any direct competitors, but that's not because the major automakers can't compete with Tesla.

Instead, it's because the mass-market automakers have largely stepped away from full-scale battery-electric-car development in the last couple of years, preferring to focus on more promising advanced technologies like fuel cells, while using (and adding to) their battery-electric expertise by building plug-in hybrids and small EVs for limited markets.

The problem, from their perspective, is that battery technology hasn't advanced as quickly as many analysts were predicting just three or four years ago. Lithium-ion electric-car batteries are heavy, and expensive, and you need a lot of them to get good range, and recharging stations are few and far between.

Tesla "solved" those problems with the Model S by designing a big car with enough luxury features to justify a high price, and by announcing plans for a network of recharging stations. It's a good solution and the Model S has found a nice market – but make no mistake, it's still a tiny niche market by global auto-industry standards.

But if there turns out to be a larger global market, it wouldn't be very difficult for any of the mass-market automakers to build something similar to the Model S – and to leverage their much greater economies of scale to put heavy price pressure on Tesla. (Sure, Tesla has some patents that might need to be licensed or worked around. But Tesla didn't invent EVs, and several of the big automakers have EV patent portfolios of their own going back a decade or more.)

What happens then?

So how is Tesla worth $100 a share?
I don't think that the hard answers to either of these questions mean that Tesla is doomed. But I do think they call into serious question the extreme sales and profit growth assumptions that are now baked into Tesla's stock at $100 a share.

At current prices, Tesla's market cap is almost $12 billion. That's about a fifth of BMW's, and BMW sold 1,845,186 vehicles last year. Tesla expects to sell 21,000 in 2013, and BMW will probably sell around 2 million.

If we assume BMW's fat margins and BMW's brand strength and BMW's consistent top-notch execution can all be approximated by Tesla, and we discount a bit (because BMW also has a motorcycle business that we're not taking into account) we can say that Tesla has to pretty much max out its factory – or make about 500,000 vehicles a year – to be worth $100 a share at BMW's multiple.

Clearly, it's not close now. But can it get close?

Tesla recently told analysts that it expects to be making around 500,000 vehicles a year eventually, but there are reasons to be skeptical about its ability to get there.

Start with this one: Counting all of its variations (wagons, coupes, sedans, convertibles, et cetera), BMW sold  406,752 3-Series around the world in 2012. Given BMW's global brand cachet and the (well-deserved) excellent reputation of the 3-Series in particular, that's probably the extreme upper limit of global annual sales for the future baby Tesla we discussed above.

The realistic number of sales that Tesla could achieve in any given year is probably a lot smaller. That means that even when we add in Model S and Model X sales, and sales from a future next-generation Roadster, Tesla's going to have to execute to perfection and dodge competitors just to get close to that 500,000 number.

Given what we know today – and granted, things could change – it's very hard to see how it could increase sales much beyond that.

Second, GM is about to roll out a new electric car of its own, the Chevy Spark EV. It's a little tiny car with just  82 miles of range, but it's priced right: $19,995 after that federal tax credit, or you can lease it for $199 a month. It's not a Tesla, but it's said to be a hoot to drive as cheap small cars go, with a zero to 60 time under eight seconds.

GM probably won't sell very many, but think long and hard about what GM – which has been playing with electric cars off and on for about 20 years now, since the first EV1 – could do if there turned out to be a serious market for a battery-electric compact luxury sedan at $45,000 or thereabouts.

Or for that matter, what BMW or Volkswagen, or Ford, or Honda could do. Remember that this mass-market Tesla is still three to four years away, according to Musk, so there's some time to work on this.

If you add up all of the above, and you can still explain to me – with facts, and realistic assumptions – why Tesla's stock is worth $100 a share right now, then you absolutely should. Scroll down to leave a comment and share your thoughts.

Tesla's plan to disrupt the global auto business has yielded spectacular results – so far. 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.


Read/Post Comments (47) | Recommend This Article (12)

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  • Report this Comment On May 28, 2013, at 7:09 PM, Ustauber wrote:

    I dont think Tesla is worth $100 a share but maybe

    $120- $145.

    I think with the great news coming up this weeks the should be able to achieve this price.

    THXTSLA.

  • Report this Comment On May 28, 2013, at 7:22 PM, TheOmen330 wrote:

    The market analysts have completely missed the valuation on this holding since the beginning; and this has become highly evident over the past 2 months as the chase on the nearly 50% short float has been on. This stock has the fundamentalists in tears, with their P/E ratios and the comparisons to 'like' companies within the automotive industry, yet it still continues to make some of us money. I think there are some immeasurables at play: 1) People want green technology to succeed 2) Elon Musk has positioned himself as a visionary and not to be bet against 3) There is a certain bandwagon excitement to 'getting on board' a revolutionary stock. With trading so easy, people constantly discuss having 'missed' their opportunity to invest in Google, Apple, Netflix. This is their chance to be a part of something.

    Analysts have published justifications of staying on the sidelines @ $40, $50, $75, $90, and now $110. Your statistics and fundamentals will serve you well for Toyota, Ford, and probably even Fiat, but at what point will you admit your dealing with an unknown and create a new model to explain a stock like Tesla?

  • Report this Comment On May 28, 2013, at 7:31 PM, TMFMarlowe wrote:

    @TheOmen330: I have a fine model for Tesla's stock. I call it "1998", which is the last time I heard arguments like yours regularly.

    Tesla is a car company. It has the same high fixed costs, long product lead times, regulatory morass, and global competition to deal with as any other car company -- except that it lacks the scale and resources of most of its potential rivals.

    And its stock will not ultimately prove to be immune to the laws of financial physics. When it creates value on the scale of AAPL or GOOG, it will deserve that kind of valuation. But with something like 10k cars sold ever, we are a very very long and uncertain way from that point.

    John Rosevear

  • Report this Comment On May 28, 2013, at 7:33 PM, TMFMarlowe wrote:

    @Usataber: "Worth" and "achieve this price" are different concepts. I don't doubt the latter, but the article is aimed at the former.

    Thanks for reading.

    John Rosevear

  • Report this Comment On May 28, 2013, at 7:50 PM, spwangsu wrote:

    Curiously to ask: have you tested driving a model S? Or have you ever visited tesla company, specifically, have you visited silicon valley in the last few weeks?

    If your answer is No, then I'd suggest you to make at least one YES to those questions, especially the last one. Your article will be a lot different, I bet.

  • Report this Comment On May 28, 2013, at 8:20 PM, ramin1963 wrote:

    Did you calculate the TCO of BMW vs. Tesla? I think the conclusion would be a different one!

  • Report this Comment On May 28, 2013, at 8:43 PM, rcgalaska wrote:

    Well the folks buying it think so but I can't follow their thought process. Currently 20% of the

    market cap of Ford ! It reminds me of some of the

    dot.com stocks a few years back before they

    blew up. Sounds like swell car with a very limited

    market since 98% or more of us could not afford

    one. It's certainly a swell story and they may well

    continue to grow, whether they can be profitable

    without the tax credit and increased competition

    from other auto manufacturers with far greater

    resources and capital remains a untold story.

  • Report this Comment On May 28, 2013, at 8:44 PM, bikerd wrote:

    If you haven't seen it already, there's an interesting profile on Musk here:

    http://www.bloomberg.com/video/73460184-elon-musk-profiled-b...

  • Report this Comment On May 28, 2013, at 8:45 PM, jamesdan567 wrote:

    The Tesla EV is 88% efficient at moving the car forward. ALL ICE cars range between 14-26% (per Dept of Transport).

    So the Tesla EV is 300-600% more efficient than ICE.

    To put this in perspective, imagine if Randy Johnson really threw his fastball at 300mph when other pitchers only did 80-100mph.

    Darwin's laws apply here. 80 million ICE vehicles sell each year. by 2030 that figure will be zero because 300%+ efficiency and growing is an ELE

    (Extinction Level Event)

    Tesla may be at the forefront or not, but they have let the cat out of the bag.

  • Report this Comment On May 28, 2013, at 9:09 PM, NOTvuffett wrote:

    jamesdan567,

    I am not trying to be rude, but obviously the Dept. of Transportation doesn't understand the physics involved and you take them at their word (I assume you are quoting accurately the numbers given by that agency). Obviously they have neglected to include inefficiencies in electrical generation, transmission, and charging costs.

    The most important factor in calculating the efficiency of ICE engines is the 'Carnot efficiency'.

    Best of luck man.

  • Report this Comment On May 28, 2013, at 9:10 PM, Jazzenjohn1 wrote:

    I admit that giving an exact valuation to Tesla is near impossible but here are a few reasons why comparing them to an ordinary automaker is foolish.

    1. Tesla captures the dealers margin as well as the automakers. The other car companies won't be able to do that anytime in the forseeable future.

    2. Tesla has 3 additional markets roughly the size of the U.S. market they haven't gotten to yet, China, Europe, and the rest of the world including S.A. and the rest of Asia.

    3. Tesla is running 1 shift, an alternative work schedule could potentially add 2 more shifts using the same tooling, and they have 3 more vehicles on the way.

    4. Tesla basically owns all the charging infrastructure there is in the U.S.

    5. Tesla doesn't have any high volume low to negative profit, loss leader vehicles like the Versa or Nano, or Rio, etc. that drain money and resources for little gain which should all but guarantee them far superior margins.

    6. Tesla is being compared to Sparks and Miev's and Leafs which aren't even on the radar of a Tesla buyer, and are all providing huge losses for the companies providing them. They are stealing sales from BMW's, Audi's, Mercedes, Jags, etc. which isn't being fully reckoned with. Tesla is a leading contender in the luxury performance segment Regardless of the engine/fuel used!

    7. They have a lead on everybody with patent protection that will keep then a step or 2 ahead of the competition for some time.

  • Report this Comment On May 28, 2013, at 10:06 PM, bentprop wrote:

    Because, the Model X is going to have Falcon Wings.

  • Report this Comment On May 28, 2013, at 10:15 PM, JustinLInh wrote:

    Let jut put it this complex question to a simple answer. It's all because Elon Musk is the CEO.

    For now and many years to come, EV especially Tesla will rules the street. Because EV is the future and the future is here now.

  • Report this Comment On May 28, 2013, at 10:23 PM, Mikeru22 wrote:

    A lot of this stuff could have been said about Apple versus Microsoft in the early 00's. Tesla is creating a cult following and as costs to produce and purchase these bad boys drop, the corresponding demand soars. Tesla knows better than to rely on the $7500 government credit and is working to make the cost cheaper in preparation but why not milk it? The truth is, the big automakers have been trying and are LOSING money off their EVs. The reason the EV hadn't caught on is because Detroit beaurocracies that are so tied into big oil arent able to pull it off like Tesla. Now Detroit is scrambling to catch up, but they are years behind. Who wants a Microsoft Zune when the iPod is just so sexy? I want the superior product, and I'm going to pay extra for it and get psyched about it because its about the perfect execution and the near perfect rating, not the result of a scramble to catch up.

    Comments comparing this to the dotcom bubble are also hyperbole. This is one company, not hundreds, and there is a truly remarkable product and company at its root. I agree it is a little scary seeing the stocks continue upward at this speed. There are still a lot of short sellers out there that will be forced to sell soon, so I see this price still climbing in the short run.

    The author is right, though, asking the question of whether the price is WORTH it. I think yes. Maybe not this soon, but why not milk it?

  • Report this Comment On May 28, 2013, at 11:24 PM, mpeace455 wrote:

    If the future is here now, wouldn't that be the present?

  • Report this Comment On May 28, 2013, at 11:25 PM, sw24612 wrote:

    There's something fishy about the Consumer Report that gave Tesla's Model S a glowing review... Was it possibly written for a couple of million dollar bribe ??? Because how can something goes from bad review just in Feb 2013 by the New York Time to a 99/100 ratings? Musk must have learned the lesson from the NY Time's bad review incidence that he now knows how to use the Media to his advantage.

  • Report this Comment On May 28, 2013, at 11:39 PM, Marshgre wrote:

    @sw24612

    Seriously? You are still referring to the debunked Broder article? The reporters own editor wouldn't even back him up in the face of the evidence that Tesla had against him.

    You also must be unfamiliar with Consumer Reports reputation. They do not accept bribes and purchase the products they test annonomously so companies do not provide them with "ringer" products.

    So much FUD.

  • Report this Comment On May 28, 2013, at 11:44 PM, AbstractLogic0 wrote:

    Well folks. If you bought at 100.00 and sold end of business for 110.00 it was certainly worth getting in at 100. Next up. Is tesla stock worth 200.00?

  • Report this Comment On May 28, 2013, at 11:49 PM, NOTvuffett wrote:

    Let us say things for what they are, the Tesla S is an upscale car for eco-weinies. That is fine if that is what you want..

  • Report this Comment On May 29, 2013, at 12:11 AM, SteveTG3 wrote:

    sw24612,

    The New York Times review of the Model S suggested it was the biggest game changer to the automobile since the Model T. Quite consistant with the Consumer Reports 99/100 rating, and Motor Trend's first ever unanimous car of the year.

    The article you mentioned about John Broder's mishap with the car was not a review of the car and not by a writer with an automobile background. It was a story about a test of the Supercharger network that the paper's own public editor concluded was put together with imprecise notes and questionable judgement.

  • Report this Comment On May 29, 2013, at 12:20 AM, kthor wrote:

    anything is worth at the price range as long as someone is willing to pay for it at that price ...

  • Report this Comment On May 29, 2013, at 12:34 AM, DonMac10817 wrote:

    Sometimes buyers just seem to lose their minds. I want Tesla to succeed, however, I do not see how the stock can be worth $100.00 per share. It reminds me of the mania that gripped the market about RIM five years ago when everybody loved Blackberry. The really good news about the stock is that other car makers are going to start to see that people will buy energy efficient cars and hopefully we are starting to see a sea change in how people view the internal combustion engine.

  • Report this Comment On May 29, 2013, at 12:46 AM, RkiteFone wrote:

    So hard to try to compare it to anything. Why I think Tesla will be the future.

    1) I don't drive a single day without seeing one pass by in Silicon Valley

    2) everybody who owns way raves about it

    3) consumer reports highest rating ever, Period

    4) Drive one and see the thrill of driving your own roller coaster

    5) Electric is cool and allows for all sources of energy to work for it

    6) It takes a company to shake or stand the system on it's head to make the leap they have - TOYOTA and MERCEDES BENZ. Two the most trusted and revered cars in "our" Century (1900) are buying the drive train from Tesla. Germany and Japan is buying US drivetrains.

    7) the electric charge stations of the future have been planned for years and in the process of being built by Tesla. Chevron/Mobile/Exxon for gas; no I will fill up at Tesla.

    8) patents galore for what Audi and BMV have not even thought of yet

    9) The fact that they are not going to be making enough, will only make it more attractive. But the Fremont facility is huge and they have plenty of room to grow.

    10) basically your replace tires as usual and then a battery in 10 years; no oil changes. Brakes last due to regeneration of energy.

    11) insane incentive plan to buy

    12) Elon has the success history as well as his team

    13) this is already their 2nd car; we act like it's the first, but the roadster has been out. Whatever anyone else makes, it will be their first, 4 years behind the Model S.

    I welcome time in this battle of words.

  • Report this Comment On May 29, 2013, at 4:07 AM, sikiliza wrote:

    The huge premium on the stock price is due to Elon Musk being the CEO, much like there was a huge premium on Apple Stock when Steve Jobs was still around. The fact that Solarcity, of which he is chairman also trended up along with Tesla for a few weeks is testament to this, more so because SCTY had not made any sort of market-moving announcements at the time.

  • Report this Comment On May 29, 2013, at 5:07 AM, MM704 wrote:

    Take a look at http://www.bmw-i-usa.com/en_us/

    BMW started its "project i" in late 2007. The model i3 is announced for 2013. A car that will be loved by all BMWmaniacs. And BMW is only the first premium carmaker that will enter this market and its competition.

    $110? Way too much today. But as I bought stocks of Tesla at $32.45 (5 years + perspective) i Feeling quiet relaxed right now.

  • Report this Comment On May 29, 2013, at 6:22 AM, Jazzenjohn1 wrote:

    I would suspect that the Solar City run up parallel to Tesla will have something to do with the Supercharger network. I think there's going to be an announcement about it next week.

  • Report this Comment On May 29, 2013, at 6:32 AM, Pixma25 wrote:

    I say, the bigger companies are waiting to see if there is demand in the EV market, it's already too late.

  • Report this Comment On May 29, 2013, at 6:38 AM, AlaaSadek wrote:

    This factory was sized to make 500,000 of ICE cars. There are at least 240 moving parts in an Internal Compustion Engin (ICE). In addition there is that fuel tank the tail pipe etc. All these units are not needed, thus this factory of Tesla can make much more than 500,000 a year.

  • Report this Comment On May 29, 2013, at 7:41 AM, johhnya wrote:

    Tesla has the technology that no one else currently has RANGE! Plus the fact that Mercedes Benz has invested heavily as well as Totota in the technology and the company will also fuel the Tesla Brand. When this company comes out with the electric car for 50 states in the $30,000.00 range, WATCH OUT!

    Elan Musk has don e what no one else so far has been able to do, TAKE BIG OIL AND BIG AUTO ON!

    I salute you Mr. Musk, you are a pioneer on the level of the late Steve Jobs!

    John

  • Report this Comment On May 29, 2013, at 9:17 AM, TMFMarlowe wrote:

    @AlaaSadek: That analysis doesn't hold. Aside from the fact that we could just as easily argue it the other way -- Toyota and GM never had to wire together a zillion battery cells for each car -- NUMMI never made engines on-site as far as I know; they were made elsewhere and shipped to the factory as completed sub-assemblies.

    It's not all that different now. Tesla won't get much more than 500k/year out of this plant. I suspect they know that and have set up their near-term business model accordingly.

    Thanks for reading.

    John Rosevear

  • Report this Comment On May 29, 2013, at 9:25 AM, AlaaSadek wrote:

    Can anyone predict when will Tesla start using the Lithium Sulfuer batteries? Or any of the long list of batteries that has >500wh/kg energy density AND a high number of recharges AND a much shorter time for charging AND are much cheaper?

    If we can not predict that date we are sure though that if any new type of battery will make even the OLD Model S have a longer range and shorter charging time.

  • Report this Comment On May 29, 2013, at 9:31 AM, SteveTG3 wrote:

    The information from Goldman Sachs this week was that based on development through Gen III Tesla would be building 500k/year cars.

    If Tesla maintains the 12% or so net margins they've guided to that equates to $20-25/share based on the breakdown of the 500k cars accross the product line GS described. $20-25 per share in 2020 or 2021 justifies the current price range (in a very top line estimate I give them an 80% chance of hitting this mark, and 20% of a fail scenario that they sell off at $30/share rescue. Price even justified if fail scenario modeled at $0/share).

    It's also worth noting that in an interview with Bloomberg just after secondary this month, Elon said 1. Gen III capex will be in billion dollar range, 2. while not a certainty, he thinks the most likely scenario is that Tesla will not need to do anymore secondaries.

  • Report this Comment On May 29, 2013, at 9:57 AM, hueminh2006 wrote:

    TMFMarlowe, you will be the loser because your analysis will be the record of loser like short at $34.00. Lol

  • Report this Comment On May 29, 2013, at 10:33 AM, holidayday wrote:

    Missed the boat, didn't you John? (sorry, had to toss the snarky comment in) :)

    From your own analysis, what price do YOU think TSLA should be?

    If it's below 100, are you going to short the stock?

  • Report this Comment On May 29, 2013, at 1:40 PM, TMFMarlowe wrote:

    Naah, I didn't miss the boat. I am not at all surprised by this run given Tesla's excellent execution, but I exceeded my lifetime quota of over-hot tech stocks back around 2000 or thereabouts.

    To answer your question directly, at this point I'd look closely at buying around $40. I think it'll be worth $100 eventually -- in 2016-2017, if all goes according to plan and no significant competitors emerge to put pressure on margins. But those are both big "ifs", and a substantial discount seems appropriate. (Of course, some of those "ifs" could cut the other way -- a big leap forward in battery tech, for example. Hard to say, and that's enough to make me disinclined to invest.)

    I don't short stocks -- I learned that lesson the hard way back in the late 1990s. I could see buying puts, maybe, but most likely I'll just continue to watch with great interest. I aim to invest only when I have a lot of confidence in the outcome, and while I can say with some confidence that I don't think TSLA is worth $100+ right now, I can't say with any confidence when (or if) the market will end up agreeing with me.

    Thanks for reading.

    John Rosevear

  • Report this Comment On May 29, 2013, at 5:24 PM, entropy78 wrote:

    Yes, there will be more competition for Tesla in the coming years, but I think people are forgetting the fact that there are going to be FAR more EV drivers, so the competition will be a non issue. I think it's pretty safe to say that when EV's are mainstream (and they will be), Tesla will still be one of the (if not THE) best selling luxury cars on the market. They are starting a step ahead and thinking outside of the box (superchargers, unique battery design, software controlled with 17"LCD, falcon wing doors), and making ridiculously beautiful cars. Owners are obsessed and everyone else is envious. I don't see that same love for even BMW's and Mercedes. As long as the same people are in charge (mainly Elon), Tesla will continue to take its share of the market from all other luxury brands and even get a piece of Toyota and Mercedes. That equates to hundreds of thousands of cars. If you don't think this will one day be true, then you are out of your mind. Just like the people who thought the Iphone was not practical bc there was no physical QWERTY keyboard and it was too expensive for the mass market.

  • Report this Comment On May 29, 2013, at 6:14 PM, trustedbymany wrote:

    Tesla may be up and coming but the share price in no way reflects anything more than excitement.

    I think you can make some money long term here but if you didn't get in under $60, I'd wait.

    I believe you will see those levels again.

    This stock is going to see a sizable correction, IMHO.

    And, I do not short stocks-never have.

    By in at the next correction.

    Peace to all.

  • Report this Comment On May 29, 2013, at 6:15 PM, trustedbymany wrote:

    Sorry, meant "buy" in.

  • Report this Comment On May 29, 2013, at 6:34 PM, sheldonross wrote:

    "but that's not because the major automakers can't compete with Tesla."

    "it wouldn't be very difficult for any of the mass-market automakers to build something similar to the Model S"

    I take issue with these statements because they're pure speculation in face of reality. Stating that things are possible vs stating things are probable are very different things.

    Could GM or Ford have competed with Japans quality in the 90's? Sure one can "imagine" that they could have, but the reality is they simply fell short.

    The major car manufacturers have had every opportunity to create a compelling EV and failed miserably every time.

    I'll take demonstrable proficiency over "could've, would've, should've" ever time.

    But back to the main point of the article, I do believe Tesla is going to have a hard time justifying that market cap.

  • Report this Comment On May 29, 2013, at 6:58 PM, trustedbymany wrote:

    Also, I have to believe anybody who was shorting the stock had to cover their position already.

    Now all you have are speculators and late comers at this stage.

    Again, I'd wait and buy back in after there is a significant correction. IMHO

    Peace

  • Report this Comment On May 29, 2013, at 7:33 PM, SteveTG3 wrote:

    John, you asked for a reasonable case for Tesla's valuation here. I believe there is one, and I made it in an earlier comment.

    I would be curious if you are busy revising your analysis of Tesla or you have some reason I am not aware of that suggests Tesla is overvalued despite what I have posted today.

  • Report this Comment On May 29, 2013, at 7:54 PM, Jackl1956 wrote:

    I am left pondering which is greater. The hatred the shorts possess for green technology, or the passion the longs have Tesla Motor's ethics and tenets.

    Time will answer this question. I know how I want my grandchildren to remember my deeds

  • Report this Comment On May 30, 2013, at 1:04 AM, moefuzz wrote:

    As for the potential "competition?" One word shows that it is not as easy as it looks: Fisker

  • Report this Comment On May 30, 2013, at 8:43 AM, Jazzenjohn1 wrote:

    I believe there will be an announcement today that basically outlines how Tesla will build out and own the entire EV charging infrastructure in the U.S.

    How do you compare that to an old line automaker?

    How do you compare Tesla's getting the manufacturer as well as the dealers profit margin to an old line automaker?

    How do you compare a company that has developed a near perfect Consumer Reports vehicle and Car of the Year on only the second vehicle they have ever designed?

  • Report this Comment On May 30, 2013, at 9:40 AM, TMFMarlowe wrote:

    @SteveTG3, There are some holes in your case, but I haven't had time to address them. I think another article is in order, and it'll probably come this weekend.

    @Jazzenjohn1, I hear your points. My real answer is long, but here's a quick summary: It's one thing to turn a small profit as a boutique small-volume automaker in a good economic environment, another thing entirely to thrive as a a mass-market OEM that's in it for the long haul and able to fend off big-league competition.

    Also, Tesla urgently needs a real lease program.

    @moefuzz: Fisker mostly proved what I've been saying all along: Making cars is harder than it looks. That's why I give Tesla big props. But what if the competitor turns out to be Audi, or Honda, or Ford, where making cars to a high global standard is everyday business?

    @Jackl1956, I am not short and I don't hate green tech. I am rooting for Tesla and I think they've done an outstanding job so far. If I could prudently afford a Model S Performance, I might well have ordered one by now.

    But as someone who is paid to follow the global auto business, I think many Tesla investors greatly underestimate both the difficulty in going from "boutique" to "mass-market" auto production, and the power and resources of the established global automakers. And I think the stock price has gotten way way ahead of itself. And I'm going to keep saying those things until/unless I'm convinced otherwise, at which point I'll tell you.

    Thanks to all for reading and commenting.

    John Rosevear

  • Report this Comment On May 30, 2013, at 9:51 AM, SteveTG3 wrote:

    John, I do have a list of about 7 risk factors, but that's why I model a fail scenario and make it part of my weighted average of Tesla valuation.

    If you know of any holes I don't, I want to add that to my modeling.

    That said, can you just name the wholes for now, even if you don't have time to lay out a full article just yet?

    fwiw, if one of the holes is Tesla's using up it's allotment of $7,500 tax credits by 2018 or so, that is correct, but not a problem. 8 years out, by 2021 I am looking at, the battery cost will at least be halved, reducing the cost of Tesla's cars to a point that compensates for this loss across the line (lowering well more than $7500 in the bigger cars, probably somewhat less in the Gen IIIs).

    one further point, the projection I gave puts in 0 growth in Tesla's sales to other car manufacturers... $20-25 eps could be vastly understated.

  • Report this Comment On May 31, 2013, at 12:18 PM, tyler1997 wrote:

    Okay. So I've been following this quite a bit.

    I want to know what you think about the long term future of Telsa. As in over 10 years from now.

    Do you think Telsa can evolve to the giant Google is?

    When I look at this stock I dont look at it from a will it be competitive in the small EV niche it currently inhabits. My question is can Telsa motors become a leader in the auto industry.

    Google started with a search engine and now does everything from email to phone software to laptops.

    Can Telsa expand like that? If they're funding the electric charging stations thats a HUGE chunk of infrastructure. If electric vehicles are the future of transportation, and Telsa motors owns all the charging stations, isn't that a huge deal?

    So I believe that they can expand. I want to know if they will.

    Thank you.

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