Think about it. How many people are interested in buying a new luxury car from a brand new, unproven company, with new, unproven, technology. To answer the question: To date 2,400 Tesla Roadsters have been sold, and 12,500 Tesla Model S’s.
The Tesla (TSLA: Nasdaq) roadster was priced at $109,000, though the car was redesigned in 2012 and is no longer sold in the United States. The Model S sedan starts at $62,400; the Model S Signature Series (read longer range) is sold out, where for $80,000 you can increase the range to 300 miles.
But wait, you can reserve a Tesla Model X utility for $5,000 or reserve the Model X Signature for $40,000. By the way, I can’t seem to find the list price for either car. Anyone making the purchase of a Tesla, and intent on holding it the mean time of how long Americans own cars these days, is betting long. A 2001 study determined that sixty percent of the cars on the road were older than six years old, and 38 percent were older than 10 years.
Until April 2013, Tesla’s stock traded principally between $20 and $35 per share, with volume that was between one and two million shares. And then it took off. The Company reported non-GAAP profitability and the stock rocketed to 190, retreating briefly to 162. It’s now trading at 176, and trades between 50 and 100 million shares per day. Can you say Bitcoin? OK, not Bitcoin, but you get the point.
In today’s press, Elon Musk, Tesla’s CEO, can do no wrong. From PayPal founder to automotive entrepreneur. Mr. Musk has paved an impressive path: from a University of Pennsylvania BS in business and BA in physics to founding a company, Zip2 that he sold to Compaq in 1999, when he was 27 years old. In 1998, he founded Paypal, selling it to eBay in 2002. That same year, he founded SpaceX, a space exploration company. Musk is also Chairman of Solar City, since 2002. He must run quite the calendar.
There is nothing, that looking at the Tesla Motor’s history, that would make you believe that Tesla should be successful and thrive. The board of directors is replete with venture capitalists and private equity investors, not automotive industry veterans. What value-added could they possibly have to a car company? At best, they know something about running numbers.
Every era has its larger than life business personalities. The 1980’s and 1990’s were Microsoft/Bill Gates and Apple/Steve Jobs. And we’ll give Steve well into the first decade of the 2000’s. The 1990s and 2000’s had Oracle and Larry Ellison, though Larry remains a force of nature.. The 2000’s decade was eBay, Craig’s List and PayPal. This decade is the Tesla/Elon Musk; Google/Sergey Brin and Larry Page decade. I guess that we should probably also mention Facebook.
So, exactly how does one go about building an electric car company when all the odds are against you? Besides vision and capital, it appears unbelievable, unstoppable drive may be the answer. Tesla shouldn’t exist. Even the name is telling. Nikola Tesla is the oft forgotten inventor of electricity. Most engineers know this historical fact, but everyone else would credit Tom Edison, the founder of General Electric, in 1892.
Tesla Motors’ valuation is currently $21.7 billion, or 103 times 2014 earnings and roughly 15 times sales. By way of comparison, Ford’s valuation is $66.6 billion, GM’s is $51.03 billion and Toyota’s is $205 billion.
In Tesla Motors, you’d think we were talking about an Internet 2.0 company. I was long ago humbled by the stock market, so I’m not going to short TSLA, but I’m not long either.
Actually, most momentum stocks have had their day in nosebleed territory, where the air is incredibly thin. It’s a right of passage.
Tesla has done a brilliant job of assembling partnerships: Panasonic, Mercedes Benz and Toyota. Panasonic’s is with the lithium ion batteries. Mercedes Benz owns 4.3 percent of Tesla, and the two companies have a collaboration whereby they have parts in each others’ cars. [Both Mercedes Benz and BMW have introduced electric vehicles, we just don’t hear a lot from them. Chevrolet has the infamous Chevy Volt.]
Another partnership is with Toyota on the RAV4, whereby Toyota invested $50 million in Tesla Motors. The RAV4 is to retail for $49,800, have a driving range of 100 miles and charge in six hours. Doesn’t sound like a winner to me. Let’s hope the Model X has better specs, though the website isn’t saying.
TSLA: The stock or the car? Definitely the car, but I’ll buy the stock on weakness.