Tesla Motors (TSLA -2.76%) is one of the most talked about stocks on the public market today. Under the visionary leadership of its chief executive, Elon Musk, Tesla has gone from being one of the most shorted stocks on the Nasdaq in 2011 to one of the best-performing stocks today. In fact, investors pushed shares of Tesla to an all-time high of over $250 in trading on Tuesday.
With the stock at the top of its game today, there are three key things that Tesla shareholders will want to keep an eye on in the year ahead. After all, being at the top makes Tesla a prime target for competitors.
Playing the long game
Every decision Musk has made up to this point reflects his long-term vision for the company. That should help buy-and-hold investors find peace of mind amid Tesla's frequent bouts of volatility. It also helps that as Tesla's CEO, Musk owns as much as 27% of Tesla Motors stock today, including stock options, according to Forbes. Ultimately, this means his priorities are aligned with those of Tesla's shareholders.
Nevertheless, investors can expect a meaningful spike in Tesla's capital expenditures in 2014 as the company continues to build out its Supercharger network and readies delivery of its crossover Model X vehicle. Tesla will also invest in "early design work" on the company's third-generation mass-market electric car , which is slated for launch in 2016.
Tesla's operating expenses should increase around 15% in the first quarter of 2014, along with research and development costs. Moreover, quarterly profits will be weighed down well into 2015 as the company continues to invest heavily in its future. Given Musk's track record of execution, I'm confident that this is a smart use of the company's cash and that patient investors will be rewarded down the road.
Supply won't exceed demand in 2014
Tesla delivered a record 6,892 Model S cars in the fourth quarter, bringing last year's total to around 22,477 vehicles. The company plans to boost that by 55% in fiscal 2014. But even if Tesla can ramp up production to 1,000 cars per week by the end of the year, up from its current level of 600 cars per week, it still wouldn't be enough to catch up to the growing demand. Customer deposits, which Tesla formerly called reservations, climbed 16% last year.
Moreover, that number continues to grow as Tesla expands into new markets outside of the U.S. An uptick in Model X orders is another reason for ballooning demand. "We're not actually trying to sell the Model X at all, but demand seems to be remarkably high," Musk said on Tesla's fourth-quarter earnings call. In fact, he believes that Model X demand may, in fact, exceed Model S demand.
Looking ahead, the real trick for Tesla will be balancing international demand with customer orders in the United States, to avoid the potential for customer frustration. Musk said he expects significant demand to come from overseas markets. In fact, by the end of the year, he believes sales in Europe and Asia combined will be almost twice that of North America, according to the latest shareholder letter (link opens a PDF).
China has already shown a tremendous appetite for Tesla's all-electric cars. "Based on current trends, it seems unlikely that we'll be able to satisfy demand in China this year," Musk told investors earlier this month. It looks like the global market for Tesla's cars is bigger than critics once thought. Now it comes down to flawless execution, as Tesla continues to dramatically expand production.
Tesla's outsized plans for the future
Forget the growth opportunities that await Tesla in the EV market. If Tesla's plans for a massive "giga factory" come to fruition, the company could unlock profits outside of the niche electric-car space. Later this week, Tesla will discuss plans for building an environmentally friendly factory that would be capable of producing lithium-ion-battery packs at a scale comparable to all lithium-ion-battery production in the world today.
In addition to achieving significant cost savings with a giga factory, Tesla may be able to produce and sell battery cells for use in other industries such as solar energy storage. Musk hinted as much in the company's latest shareholder letter saying, "This will allow us to address the solar power industry's need for a massive volume of stationary battery packs."
If you think I'm over reaching here, think again. Tesla, after all, is already in cahoots with SolarCity (SCTY.DL). As part of an ongoing partnership with the solar energy company, Tesla provides lithium-ion cells for SolarCity's new solar-powered energy storage systems. SolarCity, which is run by Musk's cousin, installs solar panels for residential and commercial clients and helps those customers finance the panels.
Additionally, SolarCity helps Tesla keep the cost of its Supercharger stations down by supplying the solar panels used to power Tesla's Supercharger network. Therefore, it makes sense that Tesla and SolarCity might work together on a future Tesla giga factory.
On top of this, Morgan Stanley analyst Adam Jonas raised his price target on Tesla to $320 today amid optimism related to a Tesla giga factory. Specifically, Jonas suggests that said factory would create "an adjacent opportunity" for Tesla to disrupt the trillion-dollar electric utility industry.