Tesla: Gone in 20 Seconds

Silicon Valley-spirited auto innovator Tesla Motors (NASDAQ: TSLA  ) has been hell on wheels. For those of us who were mulling investing in Tesla, well, I believe we blinked and we missed it.

Tesla shares motored over the $100 mark in no time flat. Although they've slowed a bit, right now the stock's been no clunker for people who invested in the stock somewhere between March and early May, not to mention last summer.

I have repeatedly considered adding Tesla shares to the Prosocial Portfolio I've been managing for Fool.com for more than two years now. I have also repeatedly chickened out (see my reasoning here and here.)

In some ways, Tesla would fit perfectly, given its innovative view on car production, its intensely green foundation (getting the world off oil), and darn it -- Tesla makes absolutely gorgeous cars. I'm not even a car buff by any stretch, and on the rare occasions that I've seen one in real life, I've had one response: an awed "oooooh".

However, Tesla's still got some devils in the details. There's its historic lack of profitability (granted, it recently reported its first quarterly profit), its current models' luxury price tags, and the build out of charging stations and anxieties about just how far Tesla's vehicles can go on one charge. The hardcore case of verbal fisticuffs between Tesla founder Elon Musk and a New York Times reporter over range issues also gave me cold feet. 

Built for speed, but what about the brakes?
Although things are looking good under Tesla's hood given recent news, it's hard to justify a 250% increase in price and a forward price-to-earnings ratio of 96. Some premium-priced stocks are OK in my book, but I don't believe Tesla has its future in the bag.

Amazon.com (NASDAQ: AMZN  ) is an example of a stock with an arguably justifiable premium. The shares always look expensive, but we also know about the massive appeal of Amazon's business and the breathtaking scope of its various product lines. It touches all of our lives one way or another. (Remember Kindle, Prime, the cloud, Zappo's, Audible, IMDb.com, and so forth.)

For investors who are looking for environmentally friendly automaker options, they may be surprised that Detroit isn't as old-school as one might think. General Motors (NYSE: GM  ) has a surprising number of sustainability initiatives, and many are admirable and impressive. One extremely impressive achievement: of 125 GM factories, 105 send no waste to landfills. Meanwhile, some investors consider GM a buy at these levels, and most probably aren't even factoring environmental responsibility into the equation. That may be a far smarter investment than what is now a momentum play that certainly might squeal to a halt.

Tesla's stock surge is certainly breathtaking in the short term, but I wouldn't buy at these levels. (I'm not the only Fool who feels that way, either.) If I had bought the shares at their lows, I might even consider selling now, although my core investing focus is long-term; if investors don't think they'll have the stomach for the very long road trip Tesla faces, they may want to get off this speeding ride now.

There's still a lot that's unproven about Tesla and its financial future, and the stock's swift ascent means investors could slam on the breaks very quickly, too. For those of us who didn't buy in early, that moment's exactly what we're waiting for.

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.


Read/Post Comments (17) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 10, 2013, at 6:23 PM, Panther007 wrote:

    Face it. You missed it. Find another gem is what I say - don't look back. Tesla is what people are screaming for - something that is innovative, functional and run by a very very smart team of people. I should have invested earlier, but I did jump in and very happy. Long term. I will own one some day too. Try not to be "debbie downer" on us because you did not pull the trigger 2 years back. It's ok - other great companies are being formed every day. Good luck! For now, I will enjoy the ride....

  • Report this Comment On June 10, 2013, at 6:39 PM, ckgod wrote:

    Did you miss it? I don't know. However I can tell you I bought six months ago and I don't plan to sell even with this phenomenal gains. The reason? It has potential of becoming the Apple a decade ago or Ford a century ago. Our perception of EV market is very different from a few years ago. A lot of this is because of what Tesla has achieved. We don't know what new innovations they will come up but I just have to bet my money on their side. Elon has just bought more shares at $92. I will trust his ability to grow his money and at the same time mine.

  • Report this Comment On June 10, 2013, at 6:53 PM, normgarry wrote:

    I bought in under $28. My Tesla shares are going to skyrocket as Superchargers and the Model X are released.

  • Report this Comment On June 10, 2013, at 7:03 PM, AjitC wrote:

    With time, battery capacity will go up 2-4x and costs drop 70% using nanotech based electrodes being developed at Argonne National Labs. Economies of scale will drop the cost of Model S, X. Just like the cost of the microwave, DVD player, Hard Drive, etc dropped... they were just electronics, but involved mechanical parts.

    Tesla has proprietary battery management tech, also on inverter, induction motor, etc. Old companies like GM, Ford, Mercedes, BWM, VW will be caught with their pants down. That is what happens when tech revolutions take place.

    Want to short? Short oil.

  • Report this Comment On June 10, 2013, at 8:51 PM, Marshgre wrote:

    And don't forget as cost of production of the Model S/X drop the sales price doesn't necessarily have to go down. These cars are priced at the priumium end of the scale and should remain there to maintain brand image. Any production cost savings should be applied to the generation 3 platform cars.

    The wider profit margins for the S and X can allow for a narrower margin on the gen. 3, keeping the purchase price relatively low. Keep in mind however that the gen. 3 will still cost $35,000 + so some will still cry that it is a "niche" "rich mans toy" that is "priced out of the reach of ordinary people". But there will always be whiners no mater what you do.

    Tesla is ahead right now and have some patents that will keep them out front for a while. But don't be surprised when Tesla starts licensing technology to manufacturers other than Daimler and Toyota. I believe it is part of Elon's master plan.

  • Report this Comment On June 11, 2013, at 2:24 AM, TMFVelvetHammer wrote:

    This was the one time my crystal ball worked, Alyce! I opened and added to my position in my rollover account in Feb and March and haven't looked back.

    Since its for the Prosocial Port and not your personal holdings, I can understand not buying at this level.

    If I hadn't already invested a decent amount, I'd still open a very small position to get "skin in the game," even at these levels. I full expect the price to fall, but these momentum runs can last a long, long time, and the end game is much larger than an $8 billion company, or whatever the market cap is today.

    So in a few years $100 may look like a bargain...

    Nice article, as always. Keepin up the awesome!

    -Jason H

  • Report this Comment On June 11, 2013, at 8:20 AM, wjcoffman wrote:

    "One extremely impressive achievement: of 125 GM factories, 105 send no waste to landfills." - Are you sure they're not just sending the waste to one of the other 20?

  • Report this Comment On June 11, 2013, at 8:32 AM, TMFMarlowe wrote:

    Nicely said, Alyce.

    John Rosevear

  • Report this Comment On June 11, 2013, at 12:44 PM, jlclayton wrote:

    I've had Tesla on my radar for about 2 years now and put a buy order in several months back. Unfortunately, it hovered above that price for awhile, and I decided to put the funds elsewhere when another stock took a dip. I just recently looked at Tesla's stock and my heart sank when I realized that I had missed it.

    If it has a decent pullback, I'll definitely pull the trigger and buy shares. But until then, it's not the first stock I've missed, and it won't be the last!

  • Report this Comment On June 11, 2013, at 2:00 PM, mdk0611 wrote:

    Tesla might have reported a profit in the 1st quarter, but it was not an operating profit. They still show a loss on every car they build. In theory, subsidies this generous won't last forever.

  • Report this Comment On June 11, 2013, at 5:21 PM, colleran wrote:

    What Tesla does not have going for it is a moat. Not only is there no moat, but there are huge sharks in the water that can match them without breaking much of a sweat. This is not to say that Tesla has not done amazing things with electric cars. I think the best they can hope for is a big takeover.

  • Report this Comment On June 11, 2013, at 8:46 PM, CromulentBrad wrote:

    Alyce, I agree with a lot of what you say. Now the question is, what is the news or number you're waiting for to make TSLA worth adding to your portfolio?

  • Report this Comment On June 14, 2013, at 1:42 PM, fgrindle wrote:

    Tesla is a one trick pony. I wonder if any of the investors above bought one?

    They are only for the very rich to show off with. Once you tire of having to plug it in every day, you realize this is not a good move.

    Battery prices will not come down enough to make the car competitive and you still have to wait hours to charge after a 150 miles.

    Musk is a genius, he paid back his government loan by selling a load of stock at $100.

    NASA financed his spacecraft design.

    His next project is a station on mars.

  • Report this Comment On June 14, 2013, at 1:44 PM, HJ66 wrote:

    wjcoffman: "Are you sure they're not just sending the waste to one of the other 20?" - No, they send it to the dealerships! (Sorry, couldn't resist)

    mdk0611: What subsidies are you talking about? You mean the "green" credits sold to other car companies? Fair enough that they didn't turn a profit before considering these, but they do not "show a loss on every car they build". They make money on every car (far higher margins than most car makers in fact), but not quite enough to cover admin/management/etc. expenses. Yet. They should pass that hurtle this quarter.

  • Report this Comment On June 14, 2013, at 10:05 PM, VictorErimita wrote:

    How, exactly, do electric cars "get the world off oil" again? Are you a nuclear power advocate?

  • Report this Comment On June 16, 2013, at 8:57 AM, HanSoLow wrote:

    I bought 14 shares of Tesla for $34.75 and 27 shares of Solar City on 2/28/13. I loved the Elon Musk story and thought a speculative investment with a small amount of capital was worth it. I sold 4 TSLA @ $70.14 on 5/10/13 and 4 more @ $86 on 5/15/13. I sold 7 SCTY @ $33.99 on 5/15/13 and 6 more @ $46 on 5/17/13. This is the first time I've been disciplined in my selling of gains on speculative growth. I still have roughly half of my investment in these though it is mostly the profit at risk. I am ashamed to say I had a roughly 90-99% gain in my AAPL purchases at the peak of $702 and did not sell anything. Lesson Learned: Even if you still like the growth / investing story or thesis, it is very prudent to take some gains off the table when the market gives them to you.

  • Report this Comment On June 17, 2013, at 10:06 AM, VetteGyrl wrote:

    It took me many years to get to the point where I had money I could afford to lose in the stock market. It took a lot of work but I finally came up with enough money that I felt I might actually make a difference but also not so much I would harm my overall future with losing it all. I tossed that money down on my very first stock trade late last year and I put it all on Tesla. It was a personal decision for me because it is the one company that I feel very strongly about both in what they are trying to do and how they are going about doing. Yes, my first trade was a bit of a emotional one but I figure we all need at least one or two in our portfolio that make us smile. =)

    The first few months when the stock was down from where I bought it were tough. I hated seeing those little red numbers, but I knew they were be back. I believe in them and the company and now look at them! It won't always be like this but this particular stock has given me just a little more courage to take a bit more our of those mutual funds and move them over to The Foolish Side!

    I have promised myself to sell a certain amount of Tesla once it reaches a particular point so that I can put that money into something else. Right now it is a pretty big part of my portfolio so it would be good to spread that around a little. But I am still in Tesla for the long haul!

    Pamela

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