Tesla (NASDAQ:TSLA) has challenged the motor vehicle industry as it tries to revolutionize the way cars are built and the way we fuel them. The cars are gorgeous and are a breath of fresh air in a world of ugly electric cars. I would love to own a Tesla and save the planet in style, but I simply can't afford to right now. The company has been facing problems with its production as well as consumer confidence, but the stock price has been on a meteoric rise since April 2013.
Tesla hasn't turned a profit since its inception and its free cash flow is also negative. The stock is trading at over 33 times its book value. Tesla's business model, from its Roadster to Model S to upcoming Model X, was to introduce its luxury line, prove the concept and slowly reach the masses by producing more affordable cars. The strategy makes sense, the company would have never been able to fund a mass production of electric cars at its start, but the company has had some serious growing pains. The company's founder, Elon Musk, had to keep the company alive with the last of his net worth.
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- TSLA 15-Year Financial Data
- The intrinsic value of TSLA
- Peter Lynch Chart of TSLA
Many analysts seem to value companies using hindsight, which drives stock prices higher. When TSLA was on the brink of bankruptcy with many unfullfilled orders, there was no way to truly gauge how well the company would do. If we look at the stock now, we may either kick ourselves in the butt for not investing in it earlier, or justify buying it at overvalued levels so we don't miss any prospective price appreciation. I just simply don't see the value in owning the stock now.