Can Tesla Keep It Up?

Tesla Motors (NASDAQ: TSLA  ) was one of last week's biggest winners, tacking on another 14% to its breathtaking year.

The company behind the all-electric Model S sedan has seen its stock soar 379% in 2013, thrilling the longs while leaving the naysayers dumbfounded.

Is Tesla really worth its nearly $20 billion market cap? That seems like a steep sticker for a company that delivered just 5,150 cars in its latest quarter, but there's more to Tesla than what you see in the rearview mirror.

One of the drivers behind last week's pop was Tesla's move to file an application for the Model E trademark. CEO Elon Musk has discussed getting a more economical electric vehicle on the market as early as 2017, and Model E would seem like an obvious name for it. Model S stands for sedan. Next year's Model X stands for crossover. Is there a better letter in the alphabet to mark the entry into the economy market than E?

These are interesting times for Tesla and Musk. 

The latest television spots for General Motors (NYSE: GM  ) position the Chevy Volt as "America's best-selling plug in," but there's more to moving cars than a number. There were 1,788 Volts sold last month, more than Tesla's monthly average this past quarter, but let's go over a few key points.

  • Tesla's sales have been held back by supply, and that's something that should find Tesla's Model S ahead of the Volt and Nissan Leaf in the next quarter or two as it ramps up production capacity.
  • Tesla's profitable. Yes, GM is in the black, but who knows how much money it's losing on the Volt? 
  • Tesla's Model S costs between two and three times the going price for the Volt. In other words, the Volt may be the top seller over the past year based on unit volume, but Tesla's the one bringing home the revenue.
This doesn't mean that Tesla isn't overvalued these days. The point here is that it's misleading to judge Tesla based on past financials.

Tesla's sitting pretty these days. Analysts see revenue climbing just 37% higher next year, but they see profitability more than tripling to $1.72 a share. Yes, there's a limit to the number of people that can fork over more than $70,000 for a new car, but Tesla's laying down the groundwork of charging stations and dealerships that will light up the roadways the moment that its more accessibly priced Model E hits the market. 

Tesla's the brand that everyone will want in the future with the stock that everyone wishes they had bought in the past.

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  • Report this Comment On August 26, 2013, at 11:50 AM, hunter3203 wrote:

    The Model E won't be an economy car. Elon Musk has talked about a starting price of $35k which is roughly half the price of the cheapest Model S. I suspect it will be close in size to a BMW 3 Series or Mercedes C Class.

    Tesla has done an amazing job with the Model S and their strategy of expanding with the similarly priced(?) Model X is a good one. For most luxury automakers their crossover models are their best sellers. The real test will be whether Tesla can meet their promised price point and capability(200 mile range) for the Model E in the promised time frame(2016). If they can do that they will be a very successful company, competing against the likes of BMW, Audi and Mercedes in the luxury market.

    The issue on their stock price is even if all of the above comes true and the Model X and E are big hits, are they a $20 Bil market cap company? That's hard to see. Tesla will have competitors selling EVs, especially when they enter the price range they've promised in 2016. It's foolhardy to think that world's largest automakers won't be able to compete against Tesla. And I think that is part of the bet that many are making and is why the stock is so high. A belief that Tesla alone will somehow rule the future in making automobiles.

  • Report this Comment On August 26, 2013, at 12:05 PM, rianjones1983 wrote:

    Elon Musk explains the metric behind their 40k unit annualized sales figure by late 2014 in their Q2 2013 Transcript @ http://stks.co/rQ32

  • Report this Comment On August 26, 2013, at 12:06 PM, speculawyer wrote:

    The biggest issue that they will have is continuing to have enough customers for its very expensive but awesome cars. That and the ability to deliver a car at half the price and still be profitable is nearly impossible but will be helped by battery price drops.

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

    I think the "E" stands for "Everyone" - as in this will be the car for "Everyone" who's in the market for a new car. Remember there are a LOT of expenses you DON'T have with an EV - and I'd personally be saving about $200/mo in gas (net from gas savings versus increased electricity). Never mind never needing oil changes, transmisison fluid changes, radiator winterizing, etc.

    Musk has said the car should be about $35K without incentives. Given the first 100k+ of the Model E run will qualify for the $7500 tax rebate (and, in many states, more incentives), you're now into the $20Ks and that's right about where the average new car price is right now.

    If he can pull this off... It'll be something to watch.

  • Report this Comment On August 26, 2013, at 2:05 PM, RustySlade wrote:

    . . . The effect of tires..

    Tesla model S has the following:

    "19" cast aluminum wheels with all-season tires (Goodyear Eagle RS-A2 245/45R19). Note: optional 21" wheels come with Continental Extreme Contact DW 245/35R21 tires"

    First: nobody with any brains is going to be driving their $80k car on 21 inch tires with half tread left in winter conditions.

    Second: .. 19 inch and 21 inch tires are expensive and although there maybe savings with electric in general, very few things are cheaper than a corrola for $2.5K .

    Its not about what the greenies want. . It's about what people can afford.

  • Report this Comment On August 26, 2013, at 7:05 PM, gene132 wrote:

    I still maintain that Tesla's future is in a joint venture with GM, FORD, or Toyota. It will be very difficult to build cars at the volume demanded, if the new model is a success. GM has unused plant capacity-they could easily build for Tesla.

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