Tesla - Time to Buy?
Tesla motors the electric car maker has been on quite of a tear lately. First news broke that it had over-taken Ford Motors as the second most valued car manufacturer in the US and then it broke past General Motors to take the #1 spot. Here's the funny thing though - Tesla Motors makes no profit yet and its earnings per share is well below 0 sitting at -4.96$ per share.
So then what justifies this high value and positive sentiment around Tesla? And furthermore, does it mean its time to invest now so future shareholders can reap the profits generated by Tesla.
One of the things an investor has to consider with Tesla is that it is a highly followed stock. Let's just put aside the great attributes of Tesla for a second. One of the reasons behind the high value of Tesla's stock is investors sentiment and the belief that Tesla will provide immense returns for years to come. Since its IPO in 2010 - Tesla has already provided returns north of 1400%. People do not want to miss out on an opportunity to reap immense returns like those seen by tech companies in the early 90's which was when Google. Apple and Microsoft began their corporate reign. One thing to remember with a high growth stock like Tesla - the expectations surrounding it are huge. People are watching and scrutinizing each and every move and the stock price reacts accordingly. As an investor you can only evaluate the company based on what you know now - where it goes in the future is up to the market.
Getting back to Tesla however, I find when choosing investments always recall the golden rule that all information that is currently known has been priced into the stock. This means the "Musk vision" the ties with SpaceX, the charging network, and environmental benefits have already priced into the stock. For the company to take off from here it would take new catalysts such as new product innovation, efficiency, profit-building and better range on their vehicles to push the stock higher. As it is the stock is very volatile so be prepared for many price swings.
is Tesla the future?
Although many car-makers have ventured into the electric car universe - none have been as prolific as Tesla. Tesla was able to combine luxury and electricity and their offerings of vehicles can cater to different consumers. They are also working on a new giga-factory to boost production and increase efficiency. Government subsidizes for their cars are also in place. At the end of the day, it all hinges on two main factors: Is Tesla able to maintain production and generate cash flow ( at some point investors will grow anxious) and second will they be able to capture a good market share and sway customers away from traditional vehicles.
Disclaimer: I hold no position in Tesla Motors and do not plan on initiating a position in the next 48hrs. I am not being compensated to write this article. All of the information presented is my own personal opinion. Please due your own research before making any financial decision and consult with a licensed representative.
Data on returns and EPS was generated on Google Finance.
Thumbnail Image from Technology News Extra.