The bull case for Tesla (TSLA- $ 250) begins with the Model S. It is a beautiful, distinctive and forward-thinking automobile. The Model S is the only electric powered vehicle (EV) that has achieved positive market recognition and material sales (about 52,000 units in 2015). Customer satisfaction level is believed to be high. The Company is introduced the Model X, a higher priced SUV, in 4Q15.
The Company recently began accepting orders for the E model due in 2018 and the response has been large (350K deposits @ $1,000) albeit of uncertain meaning.
Concurrently, the Company is building a battery factory in the Nevada desert.
The manufacturer’s stock is 10% down from a June 2015 high of 278, but sharply up (77%) since a February’ 2016 low of $141. This implies a current market capitalization of $30 billion, compared to $56 and $58 billion respectively at GM and Ford. For many including me, this relative valuation is distorted. A more realistic value, after considering the implausibility of profits and the need for additional financing would be at least a digit fewer (under $3 billion).
Tesla succeeds if the Company is able to achieve efficiency in highly vertical production; to use non-traditional auto marketing techniques; to double and redouble sales, to design appealing successor vehicles and to sustain a premium image in a premium demographic. Each of these tasks is challenging, with success also depending on the emergence of a significant EV category within the auto market.
My continuing bet is that these are too many hurdles.
BizProf100
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