Why Tesla Is Poised to Keep Pulling Back

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, electric vehicle maker Tesla Motors (NASDAQ: TSLA  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Tesla and see what CAPS investors are saying about the stock right now.

Tesla facts

Headquarters (founded)

Palo Alto, Calif. (2003)

Market Cap

$13.5 billion

Industry

Automobile manufacturers

Trailing-12-Month Revenue

$944.9 million

Management

Co-Founder/Chairman/CEO Elon Musk

CFO Deepak Ahuja

Return on Capital (average, past 3 years)

(47%)

Cash/Debt

$214.4 million / $455.5 million

Competitors

General Motors

Pininfarina

Toyota Motor

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 43% of the 472 All-Star members who have rated Tesla believe the stock will underperform the S&P 500 going forward.

Just last week, one of those Fools, patatepoil6, wrote that the Tesla bear case all boiled down to price:

Overbought. ... This company is impressive, and might change the world. Musk has done an incredible job and no doubt he is a visionary. But people tend to exaggerate the impact of technology (here, electric cars) in the short term. The real large-scale profitability for electric cars might be 10-20 years away, and by this time, there should be a lot of competition. That said, I hope Tesla will succeed, I would just not invest in it today at this price.

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Read/Post Comments (21) | Recommend This Article (8)

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 July 17, 2013, at 9:32 PM, jamesdan567 wrote:

    It appears to me the "real large scale profitability" for electric cars started about the same day Consumer Reports said the Tesla S model was the best car ever made....

    The author's historical numbers are irrelevant and provide no foundation for the title of the article.

    EV's are more than 400% more efficient (Tesla S - EPA rated 95 mpg. BMW 7 series - 22 mpg). This supports the conclusion that all 80+ million new cars sold each year in the world will be EV's by 2023. If gas prices rise the conversion just happens faster...

    Lets take a vote: How many people in the world think gas prices will rise substantially over the next 10 years?

    answer: 8 billion

    How many people think gas prices won't rise over the next ten years?

    answer: 0.00

    How many people have been correct about Tesla that bet against them in the

    last ten years? zero

    I remember back in 1993 when people said Cisco was way overvalued...

  • Report this Comment On July 17, 2013, at 9:48 PM, autoinsider wrote:

    TSLA's your classic short squeeze. Bet on this turkey one way or the other at your own deep peril.

  • Report this Comment On July 17, 2013, at 9:49 PM, autoinsider wrote:

    jamesday, Today's gasoline prices adjusted for inflation are lower than they were 20 years ago. Your numbers are out of context with inflation.

  • Report this Comment On July 17, 2013, at 10:20 PM, s2dbaker wrote:

    285 out of 475 rate TSLA as Outperform (as of this writing). That's 60% of the CAPS All-Stars who think TSLA will outperform the S&P 500.

    If you're going to use the CAPS All-Stars as an argument against purchasing a specific security, shouldn't you pick one that the majority thinks will underperform?

    There are many reasons to think that TSLA is overpriced or underpriced or even fairly priced but pointing out that a minority of CAPS All-Stars think it will underperform the S&P 500 as your lead argument that TSLA is overpriced is weak tea.

  • Report this Comment On July 17, 2013, at 11:01 PM, drax7 wrote:

    EV is the future. Tesla has a lead. The lead is now increasing. Assume sales of :

    50,000 models s

    50,000 model x

    At a net profit margin of 10% , say $8000 per car.

    That makes 800,000,000 profit, at 25 times earnings a 20 billion market cap before gen 3 comes along .

    All the forces in the universe are conspiring for this to happen.

    Less pollution which sickens us, less negative effect on climate, lower energy bills, less imported oil, made in America, better driving performance, free supercharging, best car rating ever.

  • Report this Comment On July 17, 2013, at 11:11 PM, Ustauber wrote:

    Lol

  • Report this Comment On July 17, 2013, at 11:54 PM, NavyChum wrote:

    This is the same rating system that gave Google one star? And Apple three stars? Guess they really are fools!

  • Report this Comment On July 18, 2013, at 12:14 AM, sailrmac wrote:

    The cost of gas is one item in the total cost of a car. So you can't just say the car is 400% more energy efficient. As an extreme example to make a point, if the car cost $1m each, would it matter how much more energy efficient it was?

    As for 10% or $8k profit margin per car. Well every other car manufacturer makes about 5% per car currently, maybe $2,000 per car for luxury cars. So do you really think Tesla is going to make 4x that without a major competitor stepping in a taking some of that? Assuming Tesla could make 100k cars per year anytime soon, don't you think just maybe some competitor might find a piece of that attractive?

    Oh well, keep buying, just makes a better place for me to short.

  • Report this Comment On July 18, 2013, at 12:27 AM, AdvanderMeer wrote:

    Pininfarina is a competitor? How is a car designer a competitor to an carmanufacturer?

    Fools indeed here!

  • Report this Comment On July 18, 2013, at 12:45 AM, john2000young wrote:

    Motley Fool is not only fool but also crazy. They recommended TSLA in "Stock Adviser", and now they say something against it.

  • Report this Comment On July 18, 2013, at 1:21 AM, Velek wrote:

    That's what I like about the Fool. Dissenting opinions are encouraged. If everyone had to follow the party line I would be a lot more wary.

    I own a number of shares, but I'm still not completely sure about this stock.

  • Report this Comment On July 18, 2013, at 1:37 AM, tesmanech wrote:

    You base the value of the company not on the present, but on its future projection.

    Tesla is the only automaker that has a NEW product that changes the business dynamics of the automotive industry: breaks with GAS/OIL and provides a real alternative and changes the sales and distribution.

    Compared to the automakers that compete on just color, design and "fake" emotions and fight on small percentages of market share and brand identity, Tesla is the only automaker with the true growth opportunities and start eroding significant market share from its competitor.

    Tesla is not missing orders, demand is not the problem. Tesla still has a niche product and it is still facing start up investments. It needs more products, it needs to cut in the mid-market (their third evolution).

    Though. the only reason you would not believe in TESLA is because you are convinced it to fail. Tesla is like "google+apple+dell" of the automotive industry & gas prices are just going to go UP!

  • Report this Comment On July 18, 2013, at 2:13 AM, QQ007 wrote:

    Brian Pacampara obviously doesn't understand momentum. Tesla is poised to go keep going up. The only reason Tesla pulled back yesterday was because Goldman Sachs came out and said the stock was worth $85. Of course the stock then went down only for one day, just enough for the little guy to panic and jump ship, and the big boys to plunge in and buy it for cheap the next morning. Then it bounced right back up to $120 that day. Sounds like stock manipulation to me, which is what GS is famous for.

  • Report this Comment On July 18, 2013, at 2:27 AM, QQ007 wrote:

    I went back and looked at your articles predicting which stock would bounce back and which would pull back, and it appears their predictions were correct less than 50% of the time. Apparently your All-Star members aren't all that reliable when it comes to predicting stock movement accurately. I would not invest according to their recommendations, as I need a little better track record when I'm deciding where to place my hard earned cash. Sorry.

  • Report this Comment On July 18, 2013, at 2:56 AM, Petronilus wrote:

    The car industry is not used to disruptive products and things have generally moved incredibly slow compared to what is the standard in Silicon Valley, where Tesla originates.

    History has shown that any consumer product that clearly is better can dramatically shift consumers preference. Many companies have died quickly by not having competitive products. Apple came without prior phone experience and launched the iPhone that became the most sold smart phone globally and almost wiped out the previous dominant company Nokia.

    All it takes is a superior product at the right price point, with the right marketing and sufficient manufacturing capacity.

    Now Tesla is selling the "best car ever" according to Consumer Reports and "car of the year" according to two car magazines. Next year they will launch an SUV (Model X) that will carry the same values plus more. If they can get the price down to a more mass market price point as Elon has announced in 3-4 years, things can go "Apple fast".

  • Report this Comment On July 18, 2013, at 3:15 AM, john2000young wrote:

    This video is going to shoot the TSLA even higher.

    http://www.bloomberg.com/video/inside-tesla-a-massive-factor...

  • Report this Comment On July 18, 2013, at 3:24 AM, craz4mony wrote:

    Many shorts are very ignorant. We only have one planet, one ozone layer, one mother nature. We all need to do our parts to lower emission of CO2, else we may not suffer in our generation, but our future generations surely will.

    Teals Motors is made-in-America, best auto technologies which we have not seen in this World. And now, we can travel across the country and soon to Canada for free !!!!!

    Think about BP, 76, Shell, and other oil and gas companies market caps will become the market cap of Tesla Motors in the form of more people buying Tesla's EVs in the future.

    We only have one mother nature, and we have been hurting it by driving our yesteryear gasoline cars since Ford made the first one. Thank you for not supporting ideas and workable plans that help to change the World for the better.

  • Report this Comment On July 18, 2013, at 3:26 AM, craz4mony wrote:

    The bubbles that shorts have always talked about should be their own idea of shorting Tesla Motors (TSLA).

  • Report this Comment On July 18, 2013, at 3:56 AM, ericday wrote:

    In addition to being vastly more efficient, electric cars need far less maintenance. It's no secret conventional car manufacturers make their real money off parts and service. It's built into their business model.

    What happens when a car manufacturer doesn't make their money of parts and service? You get the best cars on Earth. See the Consumer Reports article on Tesla. Tesla is able to make up for the lack of parts revenue by cutting out the middle man who provides the parts and service, dealerships.

  • Report this Comment On July 18, 2013, at 7:08 AM, tjsimone wrote:

    No quote from your buddy zzlangerhans? Shocking!

  • Report this Comment On July 18, 2013, at 3:00 PM, drax7 wrote:

    Tesla cost of manufacturing, given the simplicity of the car, will be dramatically cheaper .

    Cannot compare the simplicity of electric motor, with the ice system. Let alone transmission and axle and catalytic converter and radiator and whole bowl of spaghetti.

    The point being the margins will be substantially higher , wise up or learn how to argue better.

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