What Tesla's Sales Could Look Like in 2014 and Beyond

While many investors gasp at Tesla's wild valuation, it's time to look forward at the company's future potential.

Feb 2, 2014 at 9:01AM

Valuing Tesla (NASDAQ:TSLA) often stops investors dead in their tracks as soon as they run a few popular valuation ratios like price-to-earnings and price-to-sales. But a quick glance at Tesla's growth trajectory and its audacious goals may convince investors to take a closer look at where the company is headed and possibly even reconsider the merit of its seemingly pricey valuation. For a company like Tesla, investors have to look forward, not backward.

Model S Levi

Tesla Model S. Photo by Levi Sim, used with permission.

The 1,000-foot view
For investors who follow Tesla closely, they understand that Tesla vice president of China operations Veronica Wu's prediction that Tesla will double global sales in 2014 isn't a far-fetched goal. A rapid international expansion of both deliveries and its Superhcarger network basically hedge robust demand for the supply limited company. And given Wu's forecast, Tesla obviously believes it will make big improvements in supply bottlenecks that are currently limiting production.

If Wu's forecast plays out, the scenario would look something like this:

Model S Deliveries Estimates

* indicates quarterly estimate based on a scenario that doubles global sales in 2014. Source: Tesla press releases

The 10,000-foot view
Zooming out even further, Tesla's sales trajectory based on comments from management could look even more startling.

Estimated Annual Deliveries Tsla

Source: Tesla press releases and comments from management, particularly those of Tesla CEO Elon Musk in a recent interview with Automotive News.

While the chart above is derived on the basis of comments and aspirations expressed by Tesla's management team and not from any formal guidance, the illustrated potential for such monstrous growth gives better perspective to Tesla's pricey valuation today.

Importantly, investors shouldn't consider this 10,000-foot view as the probable scenario for Telsa in the future. Instead, investors should always heavily discount audacious aspirations to more realistic levels since many things can go wrong in growth stories like Tesla's.

But the potential of such growth highlights the key factor many investors overlook regarding Tesla stock. The company is not purely a manufacturer of luxury vehicles. While this may be the case today, the company has promised a more affordable car by 2016 or 2017. And with demonstrated demand for the company's Model S at a price point that begins at about $70,000, it's definitely possible global demand for a lower-cost Tesla vehicle could reach hundreds of thousands of units per year.

Tesla's audacious goals won't be achieved easily. Rapid expansion in service centers, retail outlets, Supercharger stations, and factory production capacity will be required, among other feats.

But big outcomes for the electric-car maker are definitely possible. Investors shouldn't let popular valuation metrics stop them from taking a closer look at disruptive stocks like Tesla.

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Daniel Sparks owns shares of Tesla Motors. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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