I recall my first time seeing the electric sports car marketed by Tesla Motors, Inc. (NASDAQ/TSLA). While my son thought it was cool, I thought it was gimmicky.
If I had listened to my son, it would have been a great investment because Tesla was trading around $33.00 at that time in November 2012. The stock spiked to $133.26 on July 15 this year, up a whopping 272.64% over the past 52 weeks, according to my stock analysis.
Even as Tesla moved higher (as you can see in the stock chart above), I was still not convinced, as my stock analysis suggested that General Motors Company (NYSE/GM) and Ford Motor Company (NYSE/F) made more sense.
The reasoning behind my stock analysis was simple: the comparative metrics between Tesla versus General Motors (GM) and Ford easily favored the old Detroit icons. But I clearly underestimated the future expectations of the company.
Chart courtesy of www.StockCharts.com
Tesla fell 14% the day following its high after Goldman Sachs suggested the stock was worth only $85.00, based on the company’s stock analysis.
The stock rallied $16.00 after analyst Andrea James of Dougherty & Co. announced that it had estimated Tesla was worth at least $200.00 and perhaps as much as $300.00 if the company executed. (Source: Rosenberg, A., “Telsa will double again: Analyst,” CNBC web site, July 17, 2013.)
So while I was previously thinking of a short trade with Tesla, I’m now thinking the company—which is the brainchild of Elon Musk, who made hundreds of millions via tech ventures—may be worth a closer look, based on my stock analysis. The man is simply brilliant.
While the current valuation of Tesla is out of whack, according to my stock analysis, the company definitely has long-term promise—especially if it can deliver on its plan and the demand for high-end electric cars continues to pick up.
After reading through some of the details of Musk’s plans, I’m becoming more intrigued. At the center of the company’s strategy is the building of a “Supercharger” network that the company predicts will eventually cover about 98% of the United States by 2015.
As my stock analysis indicates, the concept is really interesting, based on the building of the Supercharger network. The Supercharger service can recharge a Tesla car via the changing of the battery pack, and it’s free if you buy the more powerful battery. The whole process to automatically change the battery takes less than 90 seconds, according to the company.
This is impressive, and considering the high cost of fuel and the rising demand of electric cars, I actually see some promise in Tesla especially since the company’s vehicles are much more sporty than its competitors’ vehicles. While the cost of a Tesla vehicle is comparatively high, the company is working at producing cheaper vehicles with a sub-$40,000 price tag in order to drive sales.
So my stock analysis suggests that you should keep an eye on Tesla. I wouldn’t be a buyer now, but this stock could become a more interesting stock to consider buying on price weakness, or you can consider trading via call options. For example, if Andrea James is right, you can buy the January 2015 $190.00 call trading at a current premium of $17.70. The breakeven would be $207.70; but as my stock analysis indicates, this trade is risky, as Tesla would need to jump 73% before you’d reach this breakeven point—which is difficult, but achievable.