Tesla Investors Will Make This Much Over the Next 9 Years

"Simplicity is the ultimate sophistication." -- Leonardo da Vinci

While the renowned genius Leonardo da Vinci was an expert in many fields, his attitude toward simplicity reaches far outside the bounds of his time period and professions. When it comes to investing, simplicity is paramount, and is the ultimate sophistication. With this in mind, let us turn toward today's heated market debate starring Elon Musk's Tesla Motors  (NASDAQ: TSLA  ) and see how Leonardo's wisdom can tell us exactly what the future holds.

Model S. Source: Tesla Motors press images.

The most simple and logical way I can think of to evaluate Tesla is to compute what return you'll receive if the company reaches its long-term goals. Elon Musk and Tesla spell these goals out very clearly in the company's proxy statement. The company goals set around Musk's compensation package are:

  • Successful completion of the Model X Engineering Prototype
  • Successful completion of the Model X Vehicle Prototype
  • Completion of the first Model X Production Vehicle
  • Successful completion of the Gen III Engineering Prototype
  • Successful completion of the Gen III Vehicle Prototype
  • Completion of the first Gen III Production Vehicle
  • Gross margin of 30% or more for four consecutive quarters
  • Aggregate vehicle production of 100,000 vehicles
  • Aggregate vehicle production of 200,000 vehicles
  • Aggregate vehicle production of 300,000 vehicles
  • Market capitalization of $43.2 billion

All of these need to be completed by Aug. 18, 2022, in order for Musk to receive his options grant. These goals are also largely where Wall Street has derived its current valuation for the company. The last goal is what we need to focus on and its primarily the base argument for many who invest in Tesla today. So for simplicity's sake, what return would you get if Tesla were to become a $43.2 billion company nine years from today?

Mathematics 101
If you invest in Tesla at today's market price of $17.49 billion dollars and Tesla reaches it's goals, you as an investor will receive on average a 10.57% annual return over the next nine years. This is a fact, the math does not lie. Sounds pretty good right, 10.57% per year would definitely be satisfactory for most, but that's where things get fuzzy. Investing is all about the relationship between risk and reward. So what else would give us, on average, before adjusting for inflation, a 10.57% yearly return? The S&P 500 will: From 1920 through 2012 its compound annual growth rate was 10.06% per year. 

Looking at Tesla's implied rate of return using the company's goals, it becomes quickly apparent the 10.57% isn't sufficient to outweigh the risk associated with investing in the possibility the company will achieve these ambitious goals. An investor in Tesla today is being rewarded with half a percent extra return over the S&P 500 index, yet takes on significantly more risk than investing in the index.  

It may be tempting to rationalize investing in Tesla today. Maybe it'll achieve those goals in under nine years. Maybe it'll exceed those goals. While these are perfectly valid questions, it's up to you as an investor to determine your rationale for investing in whatever company you choose. So just how big are Tesla's goals outlined above?

Looking at the goal of a $43.2 billion market cap, it would be equal to $32.2 billion today. To put that into perspective, if Tesla accomplishes that goal in nine years it would be 69% the size of today's BMW brand adjusted for inflation. That in itself goes to show how ambitious Tesla's management team is, which is amazing. If you don't dream big or have mighty aspirations, then phenomenal accomplishments will never come your way. What the company has thus far achieved is monumental and a true testament to the entrepreneurial spirit in America.

Stay focused
Tesla has accomplished amazing things, but always remember to weigh risk and reward when investing. Just how much risk are you taking on for a given amount of return? The mathematics proves that with Tesla, investors are taking on a lot of risk for an amount of reward they could get by investing in a low-risk index fund. My only words of caution are: Please weigh your risks and rewards, and always be careful about how much of your portfolio is allocated to one company's future. 


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  • Report this Comment On August 12, 2013, at 4:05 PM, TurbulentTime wrote:

    Even in 2022, the growth rate of Tesla Motors could still remain phenomenal, much faster then other EV makers, if there will be any.

    Even if there are other competitor in the EV space by then, it would still be like Visa, Master Card, American Express, Discovery Card; i.e. the credit card industry, where you only have a few very successful companies in the space.

    Yet, for now, only Tesla Motors has successfully entered this new industry - Electric Vehicle and Infrastructure.

  • Report this Comment On August 12, 2013, at 4:10 PM, jetamerica wrote:

    Investors look at this as an excellent car which it almost certainly is. However, does that mean that the company is worth 1/3 of the market cap of Ford who sell 6.5 million vehicles annually versus the 21,000 of TSLA this year and maybe a goal of 400,000 in 9 years when Ford will probably sell close to 8 million units of 20 times as many. Many millions will buy AAPL products, fly LUV, buy travel through PCLN or eat MCD food but only a tiny percentage will buy a Tesla. Long run successful companies have ubiquitous products sold to a global audience.

    This is a niche product with a niche audience that requires Gov't support to make sales. This is a grossly over valued story stock

    I am short and look forward to a sub $100 stock

  • Report this Comment On August 12, 2013, at 4:26 PM, TurbulentTime wrote:

    @jetamerica ... haahaa another short who has no idea what the plan of Tesla is. If you continue to think that Tesla Motors's plan is only to produce niche product, please sell your house and farm and bet on shorting Tesla .... haahaa

  • Report this Comment On August 12, 2013, at 4:39 PM, Blkstone87 wrote:

    @jetamerica...you're short $TSLA?

    Oh my, I feel really bad for you. There is nothing other than upside for this company....

  • Report this Comment On August 12, 2013, at 4:56 PM, bshamblin wrote:

    Tesla’s share slip also follows some negative “bubble trouble” comments in Barron’s over the weekend.

    “The stock price is ridiculous because it basically implies that these guys are not going to have any competition, and will enjoy margins on par with Harley-Davidson,” Trainer said, noting that the current stock price in the $150 range “implies 25% compounded annual growth in revenue for over 20 years.”

  • Report this Comment On August 12, 2013, at 5:01 PM, kca124cain wrote:

    Wake Up. There are deep problems with Tesla.

    For example:

    If you search eBay right now: Listing 290955840979 , you will see a damaged Tesla 2011 roadster 6,500 miles, for sale. Salvage title. This vehicle was in a "minor" accident. Hit in the right door and right rear quarter just in front of the rear wheel. Looks worse than it is, because the quarter panel has been trimmed away in an attempt to access and repair an electrical problem. This would be a $2,000 to $4,000 repair on a regular car and you would be driving it, but was determined totaled because the car will not run.

    According to the current owner/ salvage dealer, the warranty has ended due to the accident.

    Tesla has failed big time. A decade ahead? No, light years behind the competition.

    When the insurance companies start to get data, Tesla's will become uninsurable – or Obama will require the costs to be spread out amongst everyone else.

  • Report this Comment On August 12, 2013, at 5:11 PM, thesaint125 wrote:

    Tesla is a joke. The only reason they are remotely able to stay a float is through government subsides.

    This is pie in the sky BS. Step one be profitable the rest will come from there. They will never be profitable. Electric cars since the 1800's couldn't compete with petrol based autos, just how it is.

  • Report this Comment On August 12, 2013, at 6:07 PM, ScottPletcher wrote:

    I'm shocked at the extraordinarily high valuation being placed on this company. Electric cars are far from proven long term: everyone just assumes it will work out. The battery must be replaced @ ~ 5 year intervals, and it costs thousands of dollars (Tesla won't give a specific price now; at one time it was $30,000 (NOT a typo), but presumably it's come down considerably from that). Will huge number of customers really pay that much for a short-range vehicle, particularly if LNG vehicles become a reality?

  • Report this Comment On August 12, 2013, at 7:08 PM, Stymie67 wrote:

    Hey Saint....they are already profitable.

  • Report this Comment On August 13, 2013, at 3:01 AM, niftymanish wrote:

    Anyone can talk the financial standpoint on the outside, but if you don't know the engineering of both the vehicle or the production, you're way out of your league.

    Just some food for thought, I've built my own Lithium Electric Car for under $15,000, it is ~80% efficient, has one moving part in its motor (compared to a gas motor that has 200+ moving parts and AT BEST 30% efficient).

    @Pletcher: As your fellow antagonist said before you, Electric Cars have been around (proven) since the 1800s. Tesla also has an 8 year, unlimited mile warranty on their batteries for the Model S. The warranty covers when the batteries are at 80% of their original charge (from 250mi to 200mi range)

    Thanks Stymie, as they have been profitable since March.

    @Saint: Elon Musk dumped pretty much all the money he made from PayPal into Tesla after the subsidies ran out, and guess what, it has paid off. The only reason we have gas cars is because gas was so damn cheap back in the day and we had no idea of its repercussions on the environment. Gas companies just destroyed any chances for electric cars to be profitable. I should say that I am NOT a tree hugger by any means. If we had primarily electric cars around now, and you proposed a gas car, every engineer would look at you as if you had 9 heads.

  • Report this Comment On August 13, 2013, at 10:32 AM, Mega wrote:

    "Looking at Tesla's implied rate of return using the company's goals, it becomes quickly apparent the 10.57% isn't sufficient to outweigh the risk associated with investing in the possibility the company will achieve these ambitious goals."

    If you make the a priori assumption that they achieve 10.6% annualized, then it's riskless.

    If you don't make that assumption, then 10.6% annualized return isn't particularly likely.

  • Report this Comment On August 13, 2013, at 10:40 AM, mikecart1 wrote:

    What people don't consider in this mythical 2022 year:

    By that time the following scenario occurs:

    1) TSLA sells 10,000 cars in 2014

    2) TSLA sells 25,000 cars in 2015

    3) TSLA merges with Space X (an Elon Musk company)

    4) Space travel is contracted out to the government bringing in more revenue and growth

    5) TSLA releases a sub-$20K car by 2016

    6) TSLA owns entire auto market by 2018

    7) TSLA buys out either Ford or GM because by this time no one is buying either brand anymore

    8) TSLA sells its 100,000th car by 2019

    9) TSLA's market cap cracks $100 billion

    10) Shareholders all take a trip to Hawaii to celebrate in their brand new Tesla's

  • Report this Comment On August 13, 2013, at 11:54 AM, StephenPace wrote:

    @kca124cain That Roadster is made of carbon fiber which is hard to repair. By contrast, a Model S is made of aluminum and the car is built like a tank. NHTSA also just released their safety ratings and crash videos for the Model S. 5 Stars in all categories with no asterisks. The Model S is likely the safest sedan on the road, period. Repairs cost about the same as any premium aluminum auto (e.g. Audi) and my insurance cost is very similar to my previous Lexus IS.

  • Report this Comment On August 13, 2013, at 12:35 PM, damilkman wrote:

    What is overlooked in this debate is to seperate company from the buisness. A great company in a terrible buisness is still a bad investment. The reality is there is massive overcapacity and evidence that car ownership has peaked in North America and Europe. As we observed with GM, National Governements will go to great lengths to ensure that their auto industry remains intact.

    The reality is if technology does improve to make electrical more viable unless a company has a mote they are suspectable to margin. The only advantage I see that Tesla has is they focus only on Electric. Today there is more money to be made with conventional internal combustion. Does not mean that there will not be intense competion when the time comes.

    In my opinion bulls big hope is Telsa has something one of the big companies wants and gets bought out for a premium.

  • Report this Comment On August 13, 2013, at 2:02 PM, hbofbyu wrote:

    Of course we are all biased towards a future where we will be rich; and no one knows what will happen with Tesla but history tells us that their chances are slim?

    Consumer Reports stated "best car tested a 99/100". The fact that a small start-up could produce something like this when the very established automakers could not is ... I don't know. Someone explain this to me.

  • Report this Comment On August 13, 2013, at 2:30 PM, JulianCox wrote:

    Good lord how some are determined to miss the point (and a great deal of wealth).

    10 year government loan, fully paid in, wait for it, 1 year.

    2022 target - 300,000 cumulative vehicle sales.

    20K, 40K, 80K, 160K E Bingo - 3 years to $43.2bn.

    That's a realistic investment outlook. Back to griping about the sky falling in... continue...

  • Report this Comment On August 13, 2013, at 2:39 PM, TMFBos wrote:

    @hbofbyu

    I personally think the reason Tesla was able to produce such an acclaimed automobile is because of the small size of the company and having a highly integrated/collaborative design and production process. I think at the bigger autos the teams get too decentralized and you end up with an end product that is convoluted and lacking in perfection. From what I've read you can tell the folks at Tesla labored over every minuscule detail to assure the entire customer experience would be perfect.

    Apple has been very good at doing just this in the past in consumer electronics with products like the iMac, iPhone, and iPod. I would love to go check out Tesla's R&D area to see if it's structured similar to how Apple develops its products.

    You should read Steve Jobs autobiography by Walter Isaacson. Its not only a wonderful read by offers some great insight in to why goes into designing a market beating product.

    Cheers,

    Blake

  • Report this Comment On August 13, 2013, at 2:41 PM, mikecart1 wrote:

    hbofbyu,

    99/100 shouldn't be a surprise. Two words: Elon Musk. IMO a greater genius than Steve Jobs. Everything Elon has touched has turned to gold. Paypal, SpaceX, SolarCity, Tesla. The dude works over 100 hours a week. Decides that a supersonic transport system would help him not waste so much time traveling. So he has an invention for that. People want to compare him to Tony Stark. I say he is better than Tony Stark. I say there has never been a mind as creative in so many unrelated fields than Elon Musk. His educational background is insane too.

    I am currently watching both TSLA and SCTY daily and will believe in Elon Musk when the price is right more than a baby believes in Santa Claus!!!

  • Report this Comment On August 13, 2013, at 4:39 PM, LennyTheFool wrote:

    Given that the S&P returns have been much worse in various 10-year periods, it's a little bit of fuzzy math to say that the expected return over the next 10 years will confidently be equal to the annualized return since 1950. More accurate would be to say that historically, there's about a 50/50 chance that the S&P500 will be above or below 10% annualized return for an arbitrary 10-year period. In other words, it's a coin flip between it and Tesla's expected growth from current value. Is Tesla better than a coin flip to hit its numbers? By how much could it exceed them?

  • Report this Comment On August 13, 2013, at 5:27 PM, slickandjake wrote:

    For me, TSLA is all speculation. Yes it could be the next AAPL story and then some. Or, yes it could go down in flames with their pie in the sky dreams. I'm not into speculation, so I will neither buy nor short this stock. It is completely off my radar. But I will root for them to keep coming up with innovative products and change the future for the better.

  • Report this Comment On August 13, 2013, at 5:31 PM, RRobertsmith wrote:

    I find most of the comments spot on and bearish, NUFF SAID.

  • Report this Comment On August 13, 2013, at 6:26 PM, Greg0U812 wrote:

    I own a 2013 Tesla Model S. Best car I've ever owned. It's only car that has paid me to own it. $5500 from the State of California and $7500 coming from the Feds. I have 8300 miles of trouble and gas free miles on the car. My home solar system takes care of the battery charge My Tesla stock has tripled since I bought the car. Elon Musk is a very interesting business man. He has a way of making things happen in a very visible way. Thus the great stock move

  • Report this Comment On August 13, 2013, at 6:27 PM, Greg0U812 wrote:

    And now for Elon Musk's Hyperloop. Another great story in th making?

  • Report this Comment On August 13, 2013, at 6:35 PM, mythshakr wrote:

    Risk shmisk, my Tesla stock is already a 10 bagger @~$160. I'm only sorry I listed to some of the IPO doom and gloomers and reduced my original buy or I would be able to buy a high end Tesla right now for cash for a $6000 investment 4 years ago.

  • Report this Comment On August 13, 2013, at 6:58 PM, cmalek wrote:

    @thesaint125:

    "The only reason they are remotely able to stay a float is through government subsides. "

    If it wasn't for government subsidies, Chrysler and GM would no longer be in existence. Even with $Billions in bailout money, Chrysler would be gone if it wasn't for Fiat.

    Now, how much did you say Tesla got in subsidies?!

  • Report this Comment On August 13, 2013, at 7:11 PM, cmalek wrote:

    @thesaint125:

    "The only reason they are remotely able to stay a float is through government subsides. "

    If it wasn't for government subsidies, Chrysler and GM would no longer exist. Even with $Billions from the government, Chrysler needed Fiat to prop them up.

    Tell me, how much money did Tesla get from the government?!

  • Report this Comment On August 13, 2013, at 7:16 PM, ponysean wrote:

    Is this comparison for real? We are comparing a single revolutionary company to the overall US economy over the last 100 years?

    Yes, if you cherry pick your data and go back to 1920, the S&P is averaging 10% per year. But guess what. It's not 1920. This average takes into account the great depression, 2 world wars, the creation of the internet, and the rise of the middle class.

    Now bring up a more realistic picture of the next 10 years by bringing up a graph of the S&P over the last 10-15 years. Return is near 1%. Why is this? The increasing size of the financial industry, tax policy, political corruption, the stagnant income of the middle class, 2 unfunded wars, increasing national and personal debt.

    If you are going to talk about 10% returns you have to take into account the US economy and the global economy, wars, politics and social unrest over the next 10 years. It is likely to be similar to the last 15 years, not the last 100 years.

    If I am going to gamble on the transition from gasoline to electric vs. the future of the economy in a diversified index fund, I'll take TSLA every time.

    I do like the Da Vinci quote though: Tesla is simple, a complicated diversified index fund like the S&P is not.

  • Report this Comment On August 13, 2013, at 7:37 PM, melbil3436 wrote:

    At this stage of my investing life I'm not into much speculation. Tesla may well hit or surpass the hype associated with it. I hope they surpass it. But I don't intend to buy an automobile that requires government support in order for me to afford it or stock that may someday be worth as much as the future value placed on it by today's visionaries. I hope Tesla's success exceeds all expectations.

    melbil

  • Report this Comment On August 13, 2013, at 7:47 PM, ListoMan wrote:

    Fair warning: I drive a Tesla, and I own the stock.

    Their product is as close to perfection that a car can be: fast, quiet, smooth, a thrill to drive. I drove a 1100 mile road trip with it and it was a blast. Consumer Reports loved it too, and deducted 1 point from perfection because electric charging is slower than liquid refueling.

    In short, a huge product disruption for the auto industry. Like the iPhone, the PC, or even the internet as a disruption. Plus this vehicle uses cheaper, cleaner fuel.

    This is a play on how long the disruption continues. If the current players don't respond with competing products quickly, Tesla will continue to have a near monopoly on quality electric cars, like what Apple used to have with the iPhone.

    The demand for these cars continues to go up. Every owner out there has 5 - 10 friends that wanted to drive it, and maybe 2 or 3 actually purchases one. The car is going viral, in a sense. The charging infrastructure buildout continues, and as it covers more and more territory road trips like mine will be become as simple as with gas cars, which then erases the 1 point where gas is better.

    For the intermediate term, Tesla has a lock on the market, with no serious competition out there. When they release the X and then Gen III, they will still be way ahead. The 5 year outlook is incredibly rosy, and better than what the analysis here suggests. After 5 years, it will depend entirely on how well other companies respond to the competition, but by then Tesla will be viewed as a higher quality brand with a better, newer, pedigree.

  • Report this Comment On August 13, 2013, at 7:57 PM, eekthecat wrote:

    A few days ago, my friend and I had a good laugh thinking about all the things that are powered by electricity, and how ridiculous it would be if they were powered by gasoline. Gas-powered TV, gas-powered remote, gas-powered blender, gas-powered vibrator... why on earth would anyone want a noisy, smelly, filthy, inefficient gas-powered thing when you can have a quiet, clean, efficient electric-powered one?

  • Report this Comment On August 13, 2013, at 8:00 PM, TMFTomGardner wrote:

    The Tesla debate is going to be one of the really beautiful investment stories over the next decade. It reminds me of the scowling at Amazon.com that happened 10-15 years ago.

    What makes Tesla even more fascinating to me is that those negative on the story bring together two groups. (1) Those shorting the stock. (2) Those supporting the present structure of the auto industry (automaker, union, dealership restrictions, et cetera).

    There are a lot of people with a built-in incentive to race around the Internet making sure that people know how badly Tesla is going to fail. And why might that be good for Tesla shareholders? Because the negativity in an auction market can create discounts. Internet comments sections are not going to change the trajectory of this company.

    Having said that, I fully expect to see Tesla fall 40-80% in value at least twice over the next decade. If you believe in Tesla, I recommend keeping some cash on the sidelines to add to your position. If you're short Tesla, just be prepared for a dangerous ride -- with opportunities to take profits on steep drops. And if you're representing the auto industry in some way. . . I recommend pushing fiercely for fundamental change to how the business works (change that, for example, Borders simply did not embrace fast enough).

    One comment I will take issue with. The idea that a great company in a tough business will always be a bad investment. I cite Southwest Airlines, the best performing stock in the US circa 1970-2000. Musk is competing against generally non-adaptive business practices. . and that can give him a big advantage.

    I would not be surprised to see TSLA below $100 sometime in the next 1-2 years. I also believe the business can deliver something remarkable over the next decade. This is a technology and design company in a sometimes grim and charmless manufacturing business. What an extremely interesting story to follow this will be.

    Thanks to Alex Scherer in Stock Advisor, we are long TSLA and very satisfied with our returns this year. Stay ready for the rodeo ride. :)

    Tom Gardner

  • Report this Comment On August 13, 2013, at 9:06 PM, TheDumbMoney wrote:

    TomG hits the nail on the head. If you see a major drop in the price of this stock -- particularly one that is generally market-related and unconnected with serious bad news at the company itself, back the electric truck up.

    I agree too with the author, that after the recent run-up the expected returns-to-risk profile is not terribly compelling.

    I drove a Model S last weekend for the first time, and it was astounding. And with a 200-mile range you do not have the same range-anxiety as with a Leaf, etc. 200 miles is a long way. After sitting five minutes in this thing, I honestly do not understand why any luxury car buyer would choose a BMW, Mercedes, Lexus, Jaguar or Audi over this thing. I am serious. People who do are basically running on auto-pilot. Brand loyalty essentially relies on our lack of imagination. Yes this is subsidized, but this is a phenomenal product. It is a better product. And Musk is a phenomenal and visionary leader. When we have our next major recession and/or 20%+ market drop, this one is at the top of my to-do list, along with AMZN, COST, WFM, and a few other smaller disruptors.

    With the market generally at at least nominal highs (and Merrill Lynch idiotically advising people in 1/2013 that "now is the time to buy stocks!), with margin debt again at record levels, Tobin Q and Case Shiller both signalling varying levels of overvaluation, the uncertainty of a new Fed Chairman and 2014 elections, the expectation of more economically-illiterate Republican debt-ceiling nonsense in the Fall, and revenue/profit expectations for the S&P for 2013/2014 flat or declining even as stocks continue to run up, I am 20% cash and amped. I have had to replace three keyboards since I started typing this comment because of all of the salivation. In the meantime I am focusing on where I perceive the most value to remain, which is in Europe, then technology stocks, then emerging markets.

    From 2007-2008 I was in mostly in bonds and saving cash. 2009-2010 were the years of buy anything for the long term (see this CAPS account), including disruptors. 2011-2012 were the years to buy a house or refinance at 30-year rate lows (me in 11/2012). 2013 is the year to be selective and reflective. For those of us who (like me, I am very sad to say) who generally failed to load up on disruptors in 2009-2010, the time to load up on these awesme, powerful disruptive companies will come again and when it does, be ready. But don't compound prior analytical errors by buying them now. Never buy from fear.

  • Report this Comment On August 13, 2013, at 9:52 PM, TMFBos wrote:

    Really wonderful to see all of the comments everyone, makes me love investing all the more. I tried to write the article around the company without taking too bullish or bearish a stance on the company.

    I think it went well as many people have commented how much they love Tesla's business and would happily invest at a lower price, and others have adamantly expressed why they think the business will fail.

    All and all, this is why investing is so great, because at a point in time there is no correct answer; time is the true judge. Thanks again for all of the insightful reply's everyone, and always remember to treat all of our fellow Foolish investors with respect no matter their viewpoint (constructive criticism is key).

    Cheers,

    Blake

  • Report this Comment On August 13, 2013, at 10:27 PM, compo11 wrote:

    Perhaps these checkpoints created for Elon's options were purposely set low so he would be able to attain them,insuring that he stick around and grow this company.If they had set them high perhaps he would be on to another more profitable endeavor...neal

  • Report this Comment On August 13, 2013, at 10:47 PM, obga18 wrote:

    a replacement battery than runs buyers 8 grand. no thanks.

  • Report this Comment On August 13, 2013, at 11:28 PM, EducatedGuesser wrote:

    I am not sure if anyone here saw the National Geographic special on the Tesla Motors factory. Like 90% of the assembly line is robotic. I bet that cuts down on union workers like the ones who hinder the productivity and profitability of other auto makers like GM and Ford (Tesla doesn't even have a union). I bet this lack of human baggage is what has led them to the profitability they currently have and will keep them profitable even if they don't meet their sales goals.

    The company produced the Motor Trend car of the year… with their FIRST generation EV Sedan. I can't wait to see what these cars are capable of by 2020... a 500 mile range would be nice... but if they implement their metal air and lithium battery combo and achieve a capable range of 1600 miles on a charge (Musk has a patent for this), the combustion engine will be a thing of the past and Tesla's market cap will look more like Toyota's (+$200 Billion).

    Interesting fact: it is twice as cheap to power an electric car with energy from a natural gas power plant than it is to have a natural gas powered car because large generators are far more efficient; so if you are betting on natural gas powered cars, that is a pipe dream.

    Either way it’s a gamble, just like with any other company in the world. Educated gambling prevails most often and there are many facts about this company that make it very intriguing. Gas prices aren't going down like the future price of electric cars so my bet is that TSLA continues upward.

  • Report this Comment On August 13, 2013, at 11:44 PM, StockGamingCom wrote:

    You gave similar reasons that Warren Buffet would give for not investing in companies like Tesla.

  • Report this Comment On August 14, 2013, at 12:49 AM, Johnwells99 wrote:

    You are assuming that Tesla does not issue new equity, in your calculations. Since they probably will issue new equity, the actual rate of return will be lower.

  • Report this Comment On August 14, 2013, at 4:39 AM, Taxodium wrote:

    What I miss in this otherwise excellent article is a critical review of competitors. Do you really believe that the Toyotas, Hyundais, Mazdas, Volkswagens etc of this globalized world are sitting still and contemplate TSLA in speechless awe? I too believe that Elon Musk is a great entrepreneur but to every Apple there is at least 1 Samsung. Key of the electric car business is battery capacity lifetime and charging facility. That aspect is not even mentioned. I would rather bet on the Japanese to come up with better batteries. They invented the Li-ion technology!

  • Report this Comment On August 14, 2013, at 6:59 AM, TopAustrianFool wrote:

    @TomG,

    "The Tesla debate is going to be one of the really beautiful investment stories over the next decade. It reminds me of the scowling at Amazon.com that happened 10-15 years ago."

    Wow! Have you missed the point or what? AMZN was creating a market for itself when it started using a new technology in a way its never being used before. All of it while taking virtually now risk and govt subsidies. TSLA is coming into an over-regulated, monopolized market with a technology that has been around for 100yrs, to compete with technology that has gotten better and cheaper over the same 100yrs. Sure Big Auto gets subsidies, but that is due to political control, not because the technology is too expensive.

    For cars, the TSLA technology is questionable at best and even if feasible, realize that prices adjust and the economy is dynamic. If TSLA cars become prevalent, that will only lower the price of internal combustion engines and gasoline.

    TSLA is as removed from Foolishness as can be.

    Govt money and subsidies.

    Not profitable.

    CEO - a hyperstar.

    Company - super hyped.

    Market - overregulated and monopolized.

    Balance sheets - padded with carbon credits.

    Old technology.

    Old Idea with loosing record for industry.

    Environment - too political.

    Risky.

    Can any of the Gardner brothers address these points? Why is it ok to ignore this?

    Mr. Gardner can you point out any of the above deficiencies in AMZN 10 - 15 yrs ago?

  • Report this Comment On August 14, 2013, at 7:04 AM, TopAustrianFool wrote:

    The only thing I see TSLA delivering is a Green Energy promise that goes Kaput when you realize that it is nothing but a "Coal Car with an Extension Cord."

    So you have green energy, environmental bents. Good for you! Mixing your ideals and politics with your investment or marriage is something you don't want to do. And is certainly not the Foolish way!

  • Report this Comment On August 14, 2013, at 7:37 AM, AndrewBaker14 wrote:

    Tesla (TSLA) is a sentiment stock as much as a new company in a (longed for by many) new technology area of electric cars.

    Sure, in time electric will command a (substantial?) share of the vehicle market, and Tesla will maybe do well from it. But currently the share price is just too high, driven by publicity and sentiment.

    Musk, making an announcement about a visionary transport system, that he's not even going to be involved with, didn't shore up the share price, and nor should it. At $50, it's worth buying, perhaps; but at $150, only perpetual motion believers will buy in, and there aren't enough of them around.

    So, sell if you hold, or short if you don't. There's plenty of time to buy back in at a much mower level.

  • Report this Comment On August 14, 2013, at 8:50 AM, TopAustrianFool wrote:

    It is not a new technology. There was an electric car in my neighborhood in the 70's. It was tiny and it looked like a YUGO, but it was there. Nothing TSLA has in that car is new or unique. Like GM's Volt TSLA also has subsidies. What TSLA has done well is that it has commanded more private investor's money than the other Auto Co's for their electric ventures. You see, although F and GM have private investor money they can't go all out on an EV because then this would give investors pause. Mr. Musk basically is a great marketer because he turned the companies biggest liability which ironically is all the company has, into a perceived strength. Military commanders have done this through the ages. Before D-Day in WWII Allied commanders had no choice but to invade through the English channel. The Germans knew it, so the turned this liability around by using inflated balloon tanks to make the Germans think they were going to invade through the Calais peninsula. TSLA is a big inflated EV balloon.

    Mr. Musk's problem was that he calculated that with enough money and a bit of time he could push the technology far enough to make up the difference. I know some of the engineers working on these batteries. They are starting to jump ship and move into other industries. I don't think very long ago Mr. Musk realized that he trapped himself. The technology is not there, and time has shown that Oil, for some reason doesn't go away. The hyperloop is nothing but a test on his exit strategy. Watch, investors will run out of patience and Mr. Musk will have drawn himself out mostly, by then.

  • Report this Comment On August 14, 2013, at 8:53 AM, TopAustrianFool wrote:

    The battery makes or brakes EV. Think about it. If an EV was anything more than a battery. Meaning if it was technology other than the battery that was more important and the battery was as good as they say, you should see battery power riding mowers by now. Unfortunately, the govt doesn't subsidize those, so it would be too expensive.

  • Report this Comment On August 14, 2013, at 9:04 AM, TopAustrianFool wrote:

    Remember this; when you are trying to pioneer technology, you don't go and announced it to the world in details. You go do it quietly and stay ahead of the competition. Unless, your whole product is snake oil.

    Jobs and others where always very protective of their technology and products before they were completed. Mr. Musk is all about telling everyone where he is going, creating expectations and then cashing in.

  • Report this Comment On August 14, 2013, at 9:57 AM, TheDumbMoney wrote:

    Austrian fool, it is clear you are frothing with messianic certainty and ideology. It is also clear you have never touched one of the cars from your multiple comments. (But go on, lie now and say that you have.). I wish I were as intelligent as you are. Unfortunately I am such an idiot that what I mainly see is a car whose interior makes other luxury cars look like trash, with phenomenal torque and handling, and with a 200 mile range that is nearly three times that of a Nissan Leaf let alone anything that existed in the 70s. But I envy you, really. It must be so nice to live in a brain where the answer to every new problem and issue comes already pre-packaged (without even needing much research, no less) because you already are in possession of universally applicable revealed truth.

  • Report this Comment On August 14, 2013, at 10:16 AM, TopAustrianFool wrote:

    TheDumbMoney,

    I have made some points, you on the other hand have said nothing. Instead of attacks why don't you address some of the arguments I have made.

    Don't get angry, just answer with some counter points, maybe I'll see something I have missed.

    I myself have interests in this technology, it would really help me if the technology worked. Unfortunately it doesn't. If you give $500B

    I could put together a couple of designs that would knock your socks off, but I would also be honest and would tell you they will be a nightmare to maintain.

  • Report this Comment On August 14, 2013, at 10:18 AM, TopAustrianFool wrote:

    "torque and handling, and with a 200 mile range that is nearly three times that of a Nissan Leaf let alone anything that existed in the 70s."

    You could say the same thing for ICE cars and lawn mowers too.

  • Report this Comment On August 14, 2013, at 10:19 AM, RockyTopBob wrote:

    I hate to see the Gardner's throw out the AMZN example whenever they are discussing stocks the market seems to have overvalued.

    Amazon is not Tesla! Apples are not oranges.

    Amazon is a place where you can get hundreds of thousands of divergent inexpensive products. Tesla is producing near $100,000 cars in an economy racked by high unemployment and multiple fiscal fears around the world.

    Argue the possible future of TSLA based on facts and probabilities not comparison to other companies whose valuation was questioned. We can talk about AMZN but we can also talk about JDSU and many other companies that were overvalued that didn't turn out like AMZN.

    The biggest risk with TSLA right now is the same as the past crash with NFLX. Hyping up a momentum stock and having people fall in love with a company such that they can't rationally deal with the facts is not a good scenario for stock investing. TSLA may work out fine like NFLX eventually did but stop the TMF cheerleading.

    Regards,

    Bob

  • Report this Comment On August 14, 2013, at 11:15 AM, TopAustrianFool wrote:

    "Hyping up a momentum stock and having people fall in love with a company such that they can't rationally deal with the facts is not a good scenario for stock investing. TSLA may work out fine like NFLX eventually did but stop the TMF cheerleading."

    I agree and I find it so out of character for TMF. I can't help but wonder why. I go back and read their recs and can't pinpoint why is this rec so different than the others.

  • Report this Comment On August 14, 2013, at 11:19 AM, TopAustrianFool wrote:

    "Gas prices aren't going down like the future price of electric cars so my bet is that TSLA continues upward."

    If you account for inflation, gas prices indeed have gone down.

  • Report this Comment On August 14, 2013, at 11:38 AM, EnigmaDude wrote:

    Zee Top Austrian Fool is just pissed that Tesla is an American car company and not Austrian! This is disruptive technology at its finest! And I am proud to be an American Fool! (But I do think the stock is curfrently over-priced)

  • Report this Comment On August 14, 2013, at 11:44 AM, LennyTheFool wrote:

    "Amazon is a place where you can get hundreds of thousands of divergent inexpensive products."

    It is now. It wasn't in 1998. Then it was a place where you could get books and there were a lot of people looking sideways at the free shipping and the difficulty of browsing on the internet and saying that Brick & Mortar stores would never be supplanted by it, and that as soon as they tried to turn a profit by charging for shipping or no longer selling books at a discount, they would get hammered by a return to physical retail.

    TopAustrianFool has lots of negative comments about how old the technology is, as if electric cars now are the same as ones from the 20s. Rather than argue about all that though, I'd like to pose this question:

    What if Tesla was simply a car company? Let's break that down:

    - It makes only high end cars right now, but plans to get into the mid-range market in the next few years.

    - Its current model is the top rated car in its class, and is vastly out-selling the competition.

    - The company is run by a CEO committed to a vision for it, with a personal fortune to spend to help it along and a proven track record of success (hence the personal fortune).

    - They have an innovative business plan that includes building a network of fueling stations where owners can fuel up for free.

    - They have an innovative business plan that involves building a network of retail stores in malls, instead of selling at huge dealership lots

    - They have a core technological design (with inherent benefits, risks, and negatives) that sets them apart from the status quo in a massive market

    - They have a ton of cache as a "cool" company

    How would that company rate? The EV aspect is a red herring - it isn't important in and of itself, it is important in how it impacts the product.

  • Report this Comment On August 14, 2013, at 12:09 PM, damilkman wrote:

    So to the Telsa bulls. What is their moat? What do they have that no other automaker cannot obtain? First in the buisness does not mean a win or Blackberry, Netcape, or Sprint would have been winners.

    I have not seen a single bit of evidence of something that Tesla does that no one else cannot. I would expect any 100K luxury car to be perfect. When they attempt to expand to six figure production what do they do that no one else can.

    Companies like Toyota and Honda have been surmising the demise of the internal combustion engine for decades. They have game planned the inflection point and will build electrical cars when it is profitable to do so. Thinking they are ignorant is silly.

    It is not that I do not believe Telsa cannot survive. I just look at the market. Total capacity has peaked. National governments will do anything to keep their companies afloat guaranteeing overcapacity and thin margins. Ten years from now we will add three more automakers in China. As of today the big money is still in the trucks which are not going to be electrified soon.

    Is anyone on this list predicting a margin that Telsa can protect? Growth without any consistant ability to make profits is not a company I would say is a win. Apple became a great stock because their margins were insane. Everyone is talking about cars looking good. But what are the details that will make Telsa dominate other then Musk is Tony Stark?

  • Report this Comment On August 14, 2013, at 12:09 PM, TMFTomGardner wrote:

    The comparison to Amazon was about the huge debate that existed over the companies. What Amazon is today, it was not 15 years ago. The debate was very contentious back then. It still somewhat is today -- but less so. My comparison there was to point out that this big battles are particularly interesting to me.

    I haven't seen any criticism of the Tesla that has convinced me -- of the car, the business, the founder, the approach. I remain open to it. But, having driven the car, the burden of proof (for me) falls to those who see the flaws. I will continue to think critically and openly. But I remain very unconvinced by criticisms of the technology, and the battery, and the competition, and the belief that "this technology has existed forever." Et cetera. For me, these are unconvincing at this point. (Doesn't mean that others shouldn't be convinced. I simply am not.)

    But there is no cheerleading here. This article was extremely balanced. And I have said what I believe is the best case against Tesla -- the stock. Namely, that I believe it will drop between 40% and 80% at least twice over the next decade. The shares have risen relentlessly this year; the stock will be volatile; and even the stocks of the greatest companies in American history got cut in half multiple times along the way to their 10-200 bagger returns.

    I'm very pleased that Alex Scherer on my Stock Advisor team recommended Tesla for us in the low $30s in November. With incredible volatility an automatic part of this story, I believe that price will prove to be an excellent one 5- and 10 years from now.

    Foolishly,

    Tom Gardner

  • Report this Comment On August 14, 2013, at 12:15 PM, TMFHousel wrote:

    <<I have not seen a single bit of evidence of something that Tesla does that no one else cannot. >>

    You can say that about virtually any company. What does Google do that others can't? There are plenty of smart programmers out there. What does Apple do that others can't? There are a lot of creative engineers in the world.

    In the end, moats can be as much about culture and vision as anything tangible.

  • Report this Comment On August 14, 2013, at 12:58 PM, TheDumbMoney wrote:

    Austrian, I'm not angry. I'm just describing you. I had already made my substantive comment before you got started. Why don't you go actually test-drive the car this weekend and then get back to us. Cheers,

    TDM

  • Report this Comment On August 14, 2013, at 1:05 PM, RockyTopBob wrote:

    "But there is no cheerleading here. This article was extremely balanced."

    Yes Tom, that is true. Spending time on the TSLA boards in the TMF services involves so much cheerleading, mostly by the members, that it just leaves me with a bad taste. I attribute that cheerleading to the words used by TMFs in the buy recs. (or things like the past "love letters" to NFLX).

    Alex has done a good job of warning of the possible drop, as you have. So I stand corrected on that point.

    Regards,

    Bob

  • Report this Comment On August 14, 2013, at 2:14 PM, damilkman wrote:

    Regarding moats APPLE made products people were willing to pay a premium for. Google captured market by introducing features people wanted that no else could supply. The creative engineers made something no one else had. Vision was translated into implementation.

    So back to Telsa what is it that you envision that they will be able to do that no one else can? What will they do to build a car cheaper or compell a customer to pay more for their product? There is a huge jump from being a niche player verses selling something the entire public wants.

    Culture and vision sound like a leap faith as ultimatly you need implementation. I recall a conversation I had about a new router vendor that was entering the market many years ago and how their engineers talked about how they had a plan to be so much more nimble then Cisco IOS. It was easy to make software changes and fix bugs when all you were doing was supporting a core internet routing table. Then the vendor realized they had to get into enteprise. More features had to be supported. And then everything began to bloat, fixed bugs became reintroduced, and cycle times lagged. The vision and culture did not translate into implementation.

    Quoting that little old lady, "Wheres the Beef". I do not see any beef from the bulls other then a few people like driving in a 100K car. I certainly hope you had a decent driving experience in a car that cost as much as a house!

    Its not like I have anything against Musk. I think is other endevors have a better chance and I think he will make big money in those. I just don't think it is going to happen with Telsa.

  • Report this Comment On August 14, 2013, at 2:19 PM, TopAustrianFool wrote:

    TheDumbMoney

    "Austrian, I'm not angry. I'm just describing you. I had already made my substantive comment before you got started. Why don't you go actually test-drive the car this weekend and then get back to us. Cheers,"

    It is a nice looking car and I bet it is great to drive one too, just based on what I consistently hear from people. I also know that the battery costs them about $40k after subsidies. I know the technological limitations as I have watched and helped a colleague work with the automotive industry to improve them. There is a physical impasse in the technology that I just can't ignore.

    My experience has been that the laws of thermodynamics have not changed much in the last 30 yrs. But you never know.

  • Report this Comment On August 14, 2013, at 2:23 PM, TopAustrianFool wrote:

    "You can say that about virtually any company. What does Google do that others can't?"

    At one time the had new method of searching, that is gone now. They have a moat that I see draining quickly.

    "What does Apple do that others can't?"

    New technologies and a track record. Both have profits.

    None of which TSLA has.

  • Report this Comment On August 14, 2013, at 2:30 PM, TopAustrianFool wrote:

    TMFTomG,

    "I haven't seen any criticism of the Tesla that has convinced me -- of the car, the business, the founder, the approach."

    What I want to know is; how does a company that violates so many of the Foolish rules make it pass your own criterion?

    the car - unproven

    the business - flooded with competitors making a profit

    the founder - ok I'll give that. He is one awesome dude.

    the approach - EV is all about technology and the storage of energy. The battery technology is incredibly costly. The materials are exotic and very difficult to obtain, as well as not as abundant as oil.

  • Report this Comment On August 14, 2013, at 3:15 PM, TheCabbageMan wrote:

    I just want to thank all the shorts out there who made me a ton of money. Couldn't have it without you :)

  • Report this Comment On August 14, 2013, at 3:43 PM, LennyTheFool wrote:

    TopAustrianFool,

    You keep coming back to the EV technology, because you seem to think that all Tesla is is an EV fad.

    What we're seeing with Tesla's popularity is that there is a market hungry to spend money on green technology, as long as they are getting something that works really well and feels cool.

    If you want to argue about implementation details, we can discuss the fact that Tesla's car has higher ratings than the other cars in its class, and the battery are significantly longer range than the competition. We can discuss the fact that the company has achieved the goals it has been setting forth so far, and thus the future goals it has set seem more believable (not guaranteed, obviously).

    If you want to argue about the ultimate market share, we can discuss how much of the market they've attacked they have already captured and how there's now reason to believe that their future products will also be high-quality relative to the field of competitors *at the time*.

    But if your main argument against them is that "electric vehicles can't be made for less than $100k" or "electric vehicle batteries can't be produced in sufficient quantity", I think the burden of proof there is on you. There are electric vehicles being sold right now for mid-range prices, so clearly that can be done. Will Tesla's technology be better than Ford's? Why would the default assumption be no? Even if they are equal, Tesla has cachet in a certain niche that will open market share for them, it has the Supercharger network, and it really, really, doesn't have to get that big a share of the global car sales market to have an enormous revenue increase.

  • Report this Comment On August 14, 2013, at 4:15 PM, damilkman wrote:

    So a question for Lenny. Are the batteries that Tesla put in its car available only to Telsa. As battery technology improves will Telsa always have a better or cheaper battery? Will Telsa have a monopoly of useage on the Supercharger network?

    You asked will Telsa's technology be better than Ford's? I hope if you are a Telsa bull you know it is or Warren Buffet will be shaking his head at you :).

    We are talking about cars not technology. When the tech becomes main stream, everyone will have it. If you do not have a moat, brand is fickle. If your going on Tony Stark is cool, its not the tech but the marketing. So maybe you think Telsa will have the best marketing. It will come down to who builds a better car for the cheapest price.

    So presuming ten years from now there is a grid that anyone can use and everyone has access to the same batteries, what do you believe Tesla can do that no one else can? Do they have an efficiency in manufacturing that no one else is aware of? Do they have technology that no one else has? What happens when all those individuals busting their butt cash their stock options on the back of the bulls driving the price up and decide to go somewhere else?

    I will reformulate I believe Musk is a very good CEO. But your betting on someone having to take market share in a very static and cut throat buisness. If were talking rockets, not very many companies launch payload into space. That is a moat. I have a feeling must of the bulls would have invested in Musks telephony play ten years ago for the same reasons. Vision and culture. But at the end of the day the stock would be a dog because it would be a great company in a bad field.

  • Report this Comment On August 14, 2013, at 6:47 PM, hbofbyu wrote:

    Damilkman,

    You make some good points but I was saying the same thing about Apple 12 years ago when they came out with their mp3 player. To me it made absolutely no sense that the iPod shuffle would dominate the mp3 player market and instigate Apple's comeback; there were dozens of other players out there. I was at trade shows with Korean and Japanese companies pushing versions of their pocket mp3 players just as capable, just as cool and they did it BEFORE Apple. They all died off.

    I would have shorted Apple. I saw nothing from an engineer's perspective that made their product better. (Which is why Engineers aren't in marketing)

    Look at it from a perspective of culture and image. That is what sells. Blind-fold anyone and let them test the difference between between Coca-cola and Sam's Cola - most won't notice. But which one would you invest in?

    I will never underestimate the cool culture again. The Tesla is cool. (By the way, John DeLorean was not cool).

  • Report this Comment On August 14, 2013, at 8:05 PM, damilkman wrote:

    Maybe it was luck. I would say it is good you did not invest in apple as you could have easily invested in any of dozens others without proof of a win.

    Maybe Tony Stark through marketing genius will build a loyal following who will be willing to pay a premium because they want what Tony has. At least that is better then the rest of the bulls.

    In regards to cool culture, it might be worth trading against but not investing against. Hummers and Range Rovers once were cool too. But it you had bet your retirement you would be sleeping in your car :)

  • Report this Comment On August 15, 2013, at 12:40 PM, inLeftfield wrote:

    this is she short version- there is a difference between the use of the words then and than. Unless you come to English from a foreign language, please apply this difference.

  • Report this Comment On August 16, 2013, at 1:50 PM, moedx13 wrote:

    Tesla is a bad buy imho. The other car companies will swallow it up. Waste of time on a disorganized disaster imho. Risk HIGHLY outweighs the Reward.

  • Report this Comment On August 16, 2013, at 2:51 PM, slickandjake wrote:

    @inLeftfield: what is she short version??

    In regards to TSLA, I stated earlier I am not going to touch this stock. Too volatile and a 50/50 chance in my opinion. Great cases made on both sides but holes can be punched in them all.

    Sure the car is cool, I even surfed its website and have thought about test driving and possibly buying one. But I worry about a lot of things. Infrastructure still limits its use now, so taking a long trip in one would be difficult. If I have to bring the car in to get fixed I would have to drive for 90 minutes to get to the nearest service center (or perhaps drive behind a tow truck?). These are hurdles that I am not willing to accept, so I will wait to see if the technology, and infrastructure, catch up to make it a less risky purchase.

    There is a lot to be said about a brand name and "cool" culture. If enough hype, and subsidies, can continue then this thing could finally take off, but there are huge hurdles to leap before it can. I think it is like a huge 747. It is going to take some thrust for take off, but I just don't know if the wings are attached properly or if there is enough fuel in the tank. And frankly, something may be cool but in the end it is going to come down to affordability. Consumers will buy cool if they can afford it, but only to a certain point. I hear Americans all the time complaining about how there are so many goods from China on the shelf and we should all buy American products, but then price shop for the cheapest part passing over the American product for the Chinese product because it saves them a few dollars. Environmentalists can point to the car having no emissions, but why is the cost so high? The car still used raw materials, took energy to build, took energy to extract the raw materials, takes energy to run, etc. In economics sometimes prices are the way they are because it is the most efficient use of the limited supply of raw materials and/or energy. I wish environmentalists would realize that a product's single point emission may only be a small percentage of the overall pollution from its creation and use.

    A long comment going on different tangents and I have only scratched the surface of my thoughts on it. Conclusion: too many unknowns to invest here. I hope TSLA succeeds for the overall benefit of society, but I won't be risking my capital until it can climb the many hurdles it has in front of them.

  • Report this Comment On August 16, 2013, at 3:10 PM, nswanberg wrote:

    I have one word for you Fools. Dilution.

  • Report this Comment On August 16, 2013, at 3:18 PM, bgk23 wrote:

    If you look at your analysis simplistically, one thing that is assumed is that the number of shares stays constant. With the big ramp up in production and everything else required to support the growth, won't they need more capital $$$$? If they decide stock is the way to go for that money, your share won't be the same of that new valuation.

  • Report this Comment On August 16, 2013, at 3:28 PM, supercooper414 wrote:

    One of the reasons I invest in Tesla is its patent portfolio. It has 154 US patents (not sure about elsewhere). Some of these look pioneering. I am hoping that technology licensing will become a supplemenatry revenue item as well.

  • Report this Comment On August 16, 2013, at 4:09 PM, TMFBoomer wrote:

    Great read, and I relish the debate. I still can't decide which Tesla 'camp' I fall into (seems like there's no middle ground), but do believe that Elon Musk has brilliantly executed his plan thus far. After building one of the best cars on the planet and, potentially, turning a profit this year, I find it hard to believe the company will not cruise past future milestones at a faster rate than it has up to this point.

    That Musk's vision is limited to the benchmarks set forth in that proxy would sell the man short. David Gardner often references a quote by the German philosopher Arthur Schopenhauer when describing the great innovators of our day:

    "Talent hits a target no one else can hit, while genius hits a target that no one else can see."

    I think Elon Musk fits in the 'genius' category at this point. Tesla is a brand, a technology platform, and a revolution in manufacturing that will provide opportunities for additional revenue streams in years to come. But it's difficult for us to share the vision he has for the company over the next 9 years. Who knew they'd be where they are today less than a decade ago?

    Isaac

    TMFBoomer

  • Report this Comment On August 16, 2013, at 4:18 PM, LazyOldMan wrote:

    I found the APPL comparison interesting. But, it like the Amazon comparison is not a good analogy. Here is my prognostication. Tesla will continue to develop and build cars using robots and the production cost will decrease to the point that margin will be maintained. Lower cost, more basic transportation cars will be made, and particularly by Toyota but to some extent GM and Ford will start to offer competitive products in the $35-$40K price range. Power density and price on batteries will continue to decrease as demand allows greater efficiency for production. Hybrids will exist for years to come... but they too will profit from better battery technology. There will be a huge fight over Tesla's patents which other EV makers will need to license. Tesla may win a few and might loose a few. But, in the end Tesla will be in a position to stay in business by building a more cost effective product and as some have noted it is just cool tech. Now the comparison to Apple is relevant.... for the short term I am long on TSLA. If Elon looks like he is going to meet his goals the stock will do great. But, eventually the competition will squeeze Tesla which has limited cash and an expensive infrastructure to build and support... The stock will get diluted or the use of debt will leverage the company too high and the stock price will fall. If you own TSLA sell if it hits $200. You will have a chance to buy in at a lower price later after the competition hits. But, the technical advantage of a modern automated business will keep the company profitable and in business for the long haul. Where you will want to be owning the shares again. But, I won't be shorting or even selling out of the money calls any time soon. For the near term I expect the upside is still too strong to ignore. Long for now.... TSLA.

  • Report this Comment On August 16, 2013, at 6:25 PM, lowmaple wrote:

    I have a small put position on tesla only because it is too expensive right now(my opinion). the price could easily slip from here. As far as compeition it WILL happen. Now when is the question. Remember last year APPL of my eye seemed unstoppable so buy TSLA judiciously and keep some cash aside for another third when it is lower. However all bets are off if Buffet buys.

  • Report this Comment On August 16, 2013, at 7:18 PM, crikescrikes wrote:

    I can't remember if this was David's quote? or Buffets? Anyway.....

    "The thing about reasonable people is that when they imagine the future, they only see the present.”

    I enjoy reading opinions from bulls and bears. In my opinion, bears only see the present. They can’t see the possibilities for Tesla;

    Musk encourages competitors into the EV field. He may just license his patents to other major auto manufacturers – and that in itself could change the expected returns over the next decade.

    There was also an idea to have an adaptor so a Tesla could be used to power the necessities in a home during a power outage.

    Innovations could branch off in a completely different path which could increase revenues above and beyond current and most optimistic financial models and spreadsheet predictions. Breakthroughs in producing and improving batteries could lead to providing a way to interchange Tesla’s batteries with batteries in a home that allow a house to be off the electrical grid….. That wouldn’t be difficult with Elon being part of Solar City, and having engineers at SpaceX.

    Many drivers prefer a hybrid vehicle. Musk may just decide to install a small compressed natural gas tank, along with an independent mini motor -- to allow a tesla with a "dead" battery to travel a max range of 20 miles to the nearest charging station. That would reduce range anxiety and possibly interest many other people into considering a Tesla. There are many who share Blake Bos preference for hybrids over pure EV's, and a electric/nat gas hybrid may just attract a new breed of customers.

    Valuations are useless at this point in Tesla’s business.

    Imagine the future. Don’t only see the present.

    Fool On

    crikescrikes

    long tsla and scty

  • Report this Comment On August 16, 2013, at 7:30 PM, x000ald000x wrote:

    TSLA stock was beaten down by short sellers into the 30s. Now the shorts are having to cover their bad bets, which has driven the stock up to 150+.

    Short interest is still 20% which is really a huge chuck of the float.

    The valuation of a stock that is highly shorted will either be way too low or way too high. It either drives it into the dirt or into the sky.

    For historical example, check out Volkswagen stock from 2005-2008. Shorted into the 30s, it gained market traction and then squeezed the shorts all the way to 499. What was VW actually worth? Whatever a distressed short seller would pay to get out of the way of the steamroller.

    I DO love the TESLA and Musk story, but the stock can now trade between 100 and 200, seemingly randomly. Hard for a value investor to swallow.

  • Report this Comment On August 16, 2013, at 9:55 PM, TMaherII wrote:

    Hi,

    My name is Tim. I work at TESLA and see everything that is going on from the inside. I actuary got to say "Good morning" to Elon one day and it was like saying hi to a rockstar. We are working everyday to make the next day even better then the day before. Everyone of us is working to make a product that is going to change the mode of transportation for the new generation. The fact that Elon has looked at the downside of EV cars that being the charging aspect, Super Charging station's that are not only quick but free. Battery swapping in less than a minute. Charging station's charged by solar. All I have to say is wait till we introduce the GEN model!!! All this technology put into a 30,000 dollar EV!

  • Report this Comment On August 17, 2013, at 1:19 AM, john2000young wrote:

    "Aggregate vehicle production of 100,000 vehicles

    Aggregate vehicle production of 200,000 vehicles

    Aggregate vehicle production of 300,000 vehicles

    Market capitalization of $43.2 billion"

    Where are all this figures coming from, what do they mean?

    TSLA used only 1/5 of the potential capacity of Fremont plant. When they expand to fully utilization of the plant, it will make 130,000 cars per year. Can't they open another plan, say in Georgia?

    GM makes 15 million car per year. Can't TSLA make just 1 million cars per year and sale them quickly, and easily?

    1 million cars = 130 billion cap according to you inference.

    I have 2 cars. both in hundreds of miles, and I am waiting for GIII Tesla in 3 years.

  • Report this Comment On August 17, 2013, at 1:46 AM, missoulamike wrote:

    I find it absurd that the government, both federal and California are subsidizing a luxury automobile. Like the guy bragging about charging his Tesla with a, that's right, subsidized solar array. It's mind boggling.

    Affluent feel good liberals feeling good about themselves to the detriment of those of us in the rank and file that can't afford the newest green gadget. It's wrong on every level. SMH.

  • Report this Comment On August 17, 2013, at 6:20 AM, JEHUNDEN wrote:

    I wouldn't be a buyer, nor a shorter of TESLA. Both positions appear to be fraught with danger. While you think electric cars is the busines, the next thing you know is he is working on some government proposal like that tube thing to transport vehicles from SFRAN to LA in 1/2 hour.

  • Report this Comment On August 17, 2013, at 12:11 PM, Jonomalley wrote:

    I love cars and really admire Tesla. I think people on this forum are getting a bit emotional in a field where emotions cost lots of people lots of money (investing). The question that should be addressed here is: "Is Tesla's current stock price worth the risk?" It shouldn't be a debate about if the cars are high quality, if they'll take over, etc but rather is worth the price. I personally think the current price is an insane investment when weighing risk vs reward.

  • Report this Comment On August 17, 2013, at 12:13 PM, colin112 wrote:

    The big question no one here has asked: How much is your ELECTRIC BILL going to increase monthly charging this thing every night, or even every other night? For every "action" there is a "reaction", sure you won't be buying gasoline anymore but you sure are going to be using a lot more electricity! And if an increased demand for electricity comes to pass through more electric cars on the road, higher electricity prices are soon to follow. You can't win folks.

  • Report this Comment On August 18, 2013, at 3:55 PM, supercooper414 wrote:

    I don't think it is going to be all that much of a factor -- the electric bill increasing. In my state, Virginia, the electric company will install a separate meter in your garage and drops the kw/h rate significantly to encourage EV owners.

    I completely disagree with the post complaining that the gov't is subsidizing a luxury car maker. It is sort of like the space program, a lot of amazing everyday technology came out of that program. I think about it as subsidizing technology -- that can be licensed and used in a range of everyday applications, in addition to, a luxury car.

  • Report this Comment On August 18, 2013, at 6:25 PM, Mykiemon wrote:

    You can't have your cake and eat it too and that's what you are doing when you complain about government subsidies to encourage a technology that will help us break our addiction to oil. Either you want to move ahead in the economy and environment or you don't. And government leadership on an issue like this should be applauded, not criticized. Had someone done this years ago, what amount of money and pollution could we have saved?

    As far as Tesla is concerned, I wish I were a MF subscriber when it was $35 a share. For now, I'm forced to wait for Tom's 40% pullback and then jump on board. I remember Delorean and this guy Musk is not him.

  • Report this Comment On August 28, 2013, at 7:38 AM, atmtechs wrote:

    tesla is here to kill the oil industry and I think they will be successful.

    Elon Musk saved his companies twice with a little on his pocket. what makes u think he will not save them if they fail in future with a lot that he has now.

    (loving coment) SpaceX will merge with Telsa and there will be a 20grand sub vehicle on sale.

    I truly think there is a brighter future for the Electric Company TSLA

  • Report this Comment On October 23, 2013, at 1:28 PM, thidmark wrote:

    "And government leadership on an issue like this"

    Thanks for that oxymoron. I needed a chuckle today.

  • Report this Comment On October 24, 2014, at 5:47 PM, Red4recon wrote:

    By no means a I an expert at the automotive industry but many post here are missing the bigger picture. Sure, LNG will be a profitable substitute to export and introduce into our commercial fleets... Sure, there are going to be hurdles to get over while every one provides critical feedback.... But the first person to draw a flying machine on paper was thought to be crazy at the time.... The first man to fly an airplane was thought to be suicidal... The first person to circumnavigate the globe in a wooden ship was thought to be a lunatic at the time....

    So, while you drive thru Starbucks and sip on your Double Tall White Chocolate Mocha and realize that your life will be spent collecting a paycheck from some one else..... Take a pause and realize that Elon Musk, Tesla, Space X are already a success as the idea has put things into motion beyond your lifetime..... So how will you be remembered?

    And by the way........ Did you see the PayPal logo on the card machine when you paid for that White Chocolate Mocha?

    DREAM BIG!!! Our future depends on it.

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