Tesla Motors (NASDAQ:TSLA), the pioneers of the Electric Car are anything but conventional. The model on which the company runs is revolutionary and beats conventional wisdom. Not surprisingly, the company has tasted heights of success and the only challenge faced so far has been a good one! That is trying to meet demand by increasing supply.
The Unusual Success Story
It is practically unthinkable to imagine that an automobile company can sustain a business model, where it sells directly to customers and consciously avoids selling vehicles through dealers. One would imagine that to be able to do so, Billions should be spent to make the Brand visible and induce customers to call up the company directly and place orders. Honestly, why would anyone bother to find out your proposition in the first place, taking time out of their busy schedules?
Yet, the company has managed to succeed so far, not only has it saved billions on doing away with the Distribution cost, but it also managed to completely keep out marketing and promotional costs. Gone are the days of the 4Ps of Marketing. This company here is teaching everyone what Word of Mouth and social media marketing can do.
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- TSLA 15-Year Financial Data
- The intrinsic value of TSLA
- Peter Lynch Chart of TSLA
The Unusual Stock Story
The Tesla stock is having an unusual Price target, ranging from a high of $325 to a low of $75. It is currently trading at a little under $200 which goes to show how volatile the stock is. The trick is whether to take Tesla as an automobile stock or a technology stock. If you look at Tesla as an auto stock, it is highly overvalued without a doubt. However, the view will be much more favourable, if you look at Tesla as a Pioneering tech company.
Analysts too are like a divided house on the stock, with all three calls of Buy, hold and sell doing the rounds and no clear consensus. I would only say that a stock that has surged 337% in less than a year is not one to be discounted. However, one must not ignore the two major dips it took during this period.
The Unusual Giga-Factory plan
CEO Elon Musk has already built quite a reputation for himself. He is being seen as a futuristic leader always taking big decisions. However, when he announced the company’s plans to build a $5 Billion battery factory, it did leave a lot of experts wondering why.
The math is simple. The company currently sells around 22,000 units and if the proposed factory were to be fully functional, it would be enough to roll out 500,000 units. It must be quite an ambitious project if the company plans to sell 500,000 units through word of mouth alone. Only good part being that the move could create plenty of job opportunities in Texas, Nevada, Arizona and New Mexico, who are in contention. One only hopes that the $2 Billion raised last month through convertible bonds will be well spent.
The Uncertain Future
Tesla is not very popular in the media as it does not spend a dime on advertising. The media created quite a huge noise when the Model S Fires were reported. If one compares that with the accidents and deaths that have occurred with Ford (NYSE:F) cars, the incident with Model S was not even comparable, as there was no glitch in the car. Yet, Ford will survive as it is too big and too strong. However, if a Tesla car were to report a death, it will be interesting to see how the company copes up. Associations of dealers too are determined to not let Tesla operate without dealers.Rulings have also gone against the company in this regard. What I want to point out is that by doing away with the conventional ways of doing business, the company has missed out the important aspect of Inclusive Growth. The investors of Tesla should better be on their toes, as one bad news could spell disaster for the company.