As anyone who follows Tesla knows, the company’s stock has shot through the freakin’ roof this year. Common comparisons have been to Apple (AAPL) and Amazon (AMZN). Tesla shares have risen approximately 400% since last year. Many are still saying the value of the stock is higher and that it’s still a buy. However, some are confident the stock has gone over (or even way over) what its true value is, and are advising that investors now steer clear of it.
An article by Robert Weinstein of TheStreet, published on MSN Money, is titled, “Buy a Tesla, steer clear of the stock.” Weinstein seems to be a fan of Tesla and its vehicles, but he writes:
At $132 per share, there’s not much to like. The forward earnings multiple is over 100 (P/Es over 20 have historically underperformed the overall market); the Quick Ratio is 0.54 (over 1 is considered safe); and last quarter’s “profit” was a result of government paid corporate welfare.
Tesla doesn’t expect to make an operating profit next quarter — and the list continues for longer than the range of its high-capacity battery.
In other words, buy the car but leave the lemon of a stock for someone else. Otherwise, you may find your investment on the side of the road needing repairs.
Still, others are feeling bullish on the stock. Wall Street Pitt writes, “TSLA is up $104, or about 307 percent year-to-date, putting the electric carmaker’s stock into a prime position on Wall Street and making it a favorite pick among growth investors.” This was after an extended quote from CNBC’s “Options Action” compared Tesla’s stock rise to that of Amazon several years back.
The real issue, for those interested in investing in long-term growth companies, is if Tesla will indeed produce a mass-market EV in 2017 and if it will dominate or take a good share of that market. I think that second part is the most complicated factor. I’m confident Tesla will produce an awesome mass-market car that is half the price of the Model S. But it won’t be the only one doing so. All the big auto companies are now producing EVs, some more seriously than others. These cars are going to get better and better, and the prices are clearly coming down. The real questions are, “will Tesla’s cars be that much better than the rest forever?” and “will it build up such a strong brand name that it becomes a major automobile company?”
In the short- or medium-term, Tesla is reportedly going to show losses in coming quarters and for 2013 as a whole. So, I’d expect the stock to drop a bit in the coming year or so. Then, I assume it will either 1) go down in the long term if Tesla doesn’t turn out to be the rockstar many of us think it is or 2) rise again later as it becomes a major automobile maker in a new Electric Car era.
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