How Audi bested Tesla

Remember this name: the Audi R8 e-tron. It’s the first electric car to outdo Tesla’s Roadster and Model S with a 280-mile range (that beats Tesla’s Model S by 10 miles or 3.7 percent).

Let’s get this out of the way: the R8 won’t directly compete with Tesla’s cars. For one thing, it’ll likely cost more than twice as much as the Model S with some analysts expecting a $200,000 sticker price. Sales will also be via special-order fulfillment only. Still, the e-tron’s a warning shot that should have Tesla investors nervous. Audi’s serious about capturing electric-car market share. They’re even taking a page out of Tesla’s playbook by first launching a supercar (comparable to the Tesla Roadster), which will help them fine-tune their technology.

Powered by a 92kWh t-shaped lithium-ion battery pack, the Audi has a higher top speed than the Model S (155 mph versus 130, though both are electronically limited) and a much faster charge time. Audi also claims the e-tron can charge in “significantly less than two hours.” That’s phenomenal considering standard charge time for the Model S can take more than 9 hours with a 240-volt outlet (superchargers are, of course, faster).

The Model S may have a slight edge in acceleration, though we don’t have an exact comparison. Published numbers say the Audi can run from 0-62 mph in 3.9 seconds. The Model S can do 0-60 in 3.2-seconds.

The most exciting part of the announcement is this: Audi’s e-tron will be a “mobile high-tech laboratory” (source). The company’s using the supercar as a test bed to push the envelope. They’ll take what they learn to develop and launch a fleet of sedans and other Tesla competitors.

Interestingly, Tesla and Audi have similar market caps. Tesla’s worth $24.38 billion vs. Audi’s $29.58 billion. The difference is the fact that Audi’s actually profitable. The German automaker’s trading at a P/E ratio of 7.12 while Tesla’s burning through as much as $300 million per quarter.

This is just the beginning of a global war. Electric car technology will change everything about transportation and that means we’re going to see a whole lot of other competitors come to market. In many ways, it reminds me of the tech bubble in the 2000s. There’s just so much potential in the space that investors can’t help but get excited. Just remember that the sexiest companies don’t prevail. The company’s that do are the companies that know how to execute and make money. Audi’s already proven it can do both.

Want proof we’re in a bubble? Look to Tesla

Tesla Motors Inc. (NASDAQ:TSLA) had revenue of $956 million last quarter. That doesn’t sound bad until you consider the company’s operating expenses of $1.031 billion. Tesla’s burning through cash, but shares in the electric car-maker are still holding onto a $24 billion market cap.

That’s stoked fire under David Stockman, Former Director of the government’s Office of Management and Budget. Tesla, he says, is “a crony capitalist con job that has long been insolvent and has survived only by dint of prodigious taxpayer subsidies and billions of free money from the Fed’s Wall Street casino.”

Continue reading “Want proof we’re in a bubble? Look to Tesla”

The one chart that should give Tesla investors a panic attack

If you follow comments from Tesla’s CEO Elon Musk, you already know Tesla’s biggest problem is keeping up with incredible demand for the company’s cars. Analysts, however, are starting to call foul. John Lovallo (Bank of America Merrill Lynch) went so far as to lower his price target on the stock to $65 based on what he says are demand problems at Tesla.

Is the market really overvaluing Tesla by almost 70 percent? If you believe numbers from Paulo Santos, Think Finance (source), perhaps it is. Here’s a chart showing Tesla’s production through Q4 of 2015, along with Santos’ estimate for Q1 in 2015:

Continue reading “The one chart that should give Tesla investors a panic attack”

Tesla heading for a 68 percent plunge?

If you’re looking for all the bearish arguments against Tesla (TSLA), look no further than analyst John Lovallo of Bank of America Merrill Lynch. Earlier this week, he lowered his price target for the electric car maker from $70 to $65 (per Business Insider). That’s 68 percent less than the stock’s trading at right now (around $204)!

Lovallo believes Tesla’s grossly over-valued for one reason: lack of demand. Tsk-tsk, says Tesla CEO Elon Musk. Demand’s not he problem, supply is. Why then, Lovallo wonders, are Tesla’s factories underutilized?

Continue reading “Tesla heading for a 68 percent plunge?”

How Tesla hits $600 per share

Tesla’s biggest cheerleader has to be Global Equities analyst Trip Chowdhry. Chowdhry’s way out in front of the average Tesla price target of $277.50. His price target? $385. That’s more than 75 percent higher than the stock’s current price. Why’s Chowdhry so bullish?

Continue reading “How Tesla hits $600 per share”

Tesla stock worth more than Big 3 combined?

If you’re in search of the ultimate Tesla (TSLA) bull, look no further than Trip Chowdhry of Global Equities Research. He has a $385 Tesla price target. That number’s not based on current car sales; it’s based on the notion that the world’s entire transportation ecosystem is on the cusp of a revolution. And Trip Chowdhry believes Tesla’s leading the charge.

Continue reading “Tesla stock worth more than Big 3 combined?”

4 things Tesla must do to hit $300 a share

1) Tesla must hit its second production target date on the Model X. Tesla’s developing something of a reputation for missing its production targets. It happened with the Model S, and it already happened once with the Model X.

Continue reading “4 things Tesla must do to hit $300 a share”

How to invest in lithium stocks

As with any emerging industry, investing in lithium stocks requires a lot of homework. Here are three ways to bet on the industry including several lithium stock picks.

Looking at investing from a macroeconomic view, it’s difficult to find arguments against the future of lithium. In the words of Forbes, “The gas engine made petroleum the world’s biggest commodity. The electric car could do the same for (lithium).”

When Tesla Motors Inc. (NASDAQ:TSLA) unveiled the company’s luxury electric car, the Roadster, it took the rest of the car industry by surprise. Chevy and Nissan had banked on enormous lithium batteries in their respective electric cars (the Volt and the Leaf), while the Roadster linked together thousands of small lithium-ion batteries (not unlike what you’ll find in your laptop). The net effect was lower costs and higher performance.

No matter what the end battery looks like though, most of the world’s top electric vehicles rely on lithium battery technology to store and deliver energy. And the demand for lithium carbonate and lithium metal should climb rapidly alongside demand for electric cars and mobile gadgets with long battery lives.

As with any emerging industry, investing in lithium stocks requires a lot of homework. Here are three ways to bet on the industry:

1) Invest in a lithium ETF. There are currently two lithium-related ETFs that trade on the New York Stock Exchange (see my post ETFs explained in pictures for information on ETFs). The first, Global X Lithium ETF (NYSE:LIT) is a pure-play on lithium stocks. It seeks to replicate the yield of the Solactive Global Lithium Index – an index composed of “companies active in exploration and/or mining of Lithium or the production of Lithium batteries.” Buying shares in LIT is like investing in each of the 20+ companies that comprise the Solactive Global Lithium Index.

The second lithium ETF on the NYSE is the Market Vectors Rare Earth/Strategic Metals ETF (NYSE:REMX). REMX invests in companies engaged in the mining of lithium, but also 48 other rare earth and strategic metals companies. That makes REMX far less of a pure play on lithium, but it does distribute risk across several other elements that are increasingly used in high-tech products including wind turbines and hybrid vehicles.

2) Invest directly in lithium stocks. There are a number of companies that are engaged in the mining and production of lithium. The biggest beyond a doubt, though, is Sociedad Quimica y Minera (NYSE:SQM). Based in Chile, SQM produces nearly 30 percent of the world’s lithium carbonate. The company holds rights to huge swaths of the Salar de Atacama – a Chilean lake bed that’s purported to hold 27 percent of the world’s lithium. Here’s a list of the world’s top five biggest lithium stocks (including SQM) and their stock performance year-to-date:

Stock YTD Gain
Sociedad Quimica y Minera (NYSE:SQM) -19.25%
FMC Corporation (NYSE:FMC) -13.8%
Rockwood Holdings, Inc. (NYSE:ROC) +.64%
GS Yuasa Corporation (TYO:6674) -34.7%
Saft Groupe SA (EPA:SAFT) -28%
Galaxy Resources Limited (ASX:GXY) -56.9%

As you can see, it hasn’t exactly been a banner year for lithium stocks, but that could change quickly if and when the global economic gloom starts to lift (or if we suffer through higher crude oil prices). If that happens, you can expect penny lithium stocks to outperform their larger rivals (see my post Top five penny lithium stocks).

3) Invest in car companies that harness lithium technology. The most promising area in lithium technology is the electric vehicle industry. Several companies in the space stand out including:

  • Tesla Motors Inc. (NASDAQ:TSLA): Manufacturer of the all-electric Tesla Roadster
  • General Motors Company (NYSE:GM): Manufacturer of the hybrid Chevy Volt
  • Nissan Motor Co., Ltd. (PINK:NSANY): Manufacturer of the all-electric Nissan Leaf
  • BYD Company Limited (HKG:1211): Manufacturer of the all-electric E6 (see my post BYD Auto IPO: Is the battered Chinese battery and car maker stock a buy?)

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BYD Auto IPO: Is the battered Chinese battery and car maker stock a buy?

BYD has applied to start trading in China via a new IPO. Not everyone’s sold on the company’s future prospects, though. Here are four reasons to consider avoiding shares in BYD despite an endorsement from Warren Buffett.

BYD Company Limited (HKG:1211) got one of the investment world’s biggest endorsements when a Warren Buffett company ponied up $230 million to invest in BYD during the height of the financial meltdown in 2008. Now, BYD Auto, which has long traded on the Hong Kong Stock Exchange, has applied to start trading on China’s Shenzhen Stock Exchange as it seeks new capital for expanding its operations. Not everyone’s sold on the company’s future prospects, though. Here are four reasons to consider avoiding shares in BYD’s latest IPO:

1) Time for a turnaround? Things haven’t looked good for BYD over the past year. The company’s Hong Kong-listed stock has tumbled 60 percent since the start of the year on weaker sales and the conclusion of a government subsidy for economy vehicles in China.

Sensing problems on the horizon, BYD has undertaken big plans to orchestrate a turnaround. The company has partnered with Daimler AG (PINK:DDAIF) to build its first all-electric car and its announced plans to unveil an SUV and several additional higher-end vehicles with larger profit margins.

BYD’s management is fully aware of the mounting competition it faces from GM, Volkswagen and Nissan. We’re “preparing for a price war,” BYD’s head of sales Xia Zhibing wrote on his blog last month (per Bloomberg). The problem is, BYD doesn’t have much room to tinker with its pricing. Profit margins were cut in half last year to 5 percent on growing competition in the Chinese market.

2) The E6 as savior? After several delays, BYD promises its on target to begin delivering it’s all-electric E6 to corporate and government clients in the U.S. this year. The E6 is expected to be available for retail consumers in the U.S. next year and should have a range of 186 miles on a single charge. Although BYD’s the world’s largest battery maker, some suspect the E6’s delays are due to problems achieving the electric car’s promised range.

If it’s any indication, American car reviewers have been less than impressed with BYD’s other offerings to date. The New York Times published a scorching review of the F3DM – a combination pure-electric/gas-powered car that operates like the Chevrolet Volt. “The steering wheel vibrates. The dashboard hums. You feel the vibration in your molars,” a reviewer wrote after test-driving the car in February.

3) Looming litigation. If the E6 does indeed make it to the U.S., the company could face intellectual property lawsuits. BYD has long been accused of backwards engineering existing cars, modifying them slightly and slapping their own logo on the hood. The company’s also been accused of falsely touting high safety standards. “If you shut the doors too hard, they fall off,” an unnamed consulate told Reuters.

4) The Sokol sting. Much of the credit for Warren Buffett’s investment in BYD goes to David Sokol – the embattled exec who left Berkshire Hathaway Inc. (NYSE:BRK.A) at the end of March, and has since taken fire for allegedly investing in a company that Berkshire ultimately acquired. “Whether or not they can manufacture their own cars isn’t relevant to us, because we see their real expertise is in the development of the batteries, the motors, the control systems for that,” Sokol told Reuters in January 2009. “That’s not to say that they can’t make a nice car, but a lot of people can make a nice car. The breakthrough from our perspective is the battery technology.” Until we get a real look at how BYD’s batteries perform in the E6, the rest is just smoke and mirrors.

Indeed, the whole thing has me wishing BYD would go back to focusing exclusively on batteries. The company has said a big chunk of the funds from it’s China IPO would go toward developing lithium-ion and solar batteries (per Reuters), but it’s also planning to spend heavily on growing BYD’s automotive line. Unless there’s a major cultural shift in the company’s highest level of leadership, though, I wouldn’t expect that turnaround to happen anytime soon. BYD may be good at batteries, but they’re a long ways off from being good at making cars.

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Is Ally IPO a buy?

Will the Ally IPO be a buy? Here are three (not necessarily convincing reasons) to be bullish on the stock.

Welcome to the new incarnation of GMAC: Ally Financial, Inc. The storied company was originally founded by General Motors in 1919 as a lending house for car buyers. Nearly a century later, GMAC had expanded into insurance, online banking, and subprime lending.

It was subprime lending, of course, that would eventually knock GMAC Bank to its knees in May of 2008. The Federal government swept in, buying ever-larger chunks of the company until – in December of 2010 – it would become the majority stakeholder. Out of the ashes would rise Ally Financial, a bank holding company that’s announced plans to go public with an IPO in the next several months. Will the Ally IPO be a buy, though? Here are three (not necessarily convincing reasons) to be bullish on the stock:

1) Dollars and cents. Ally’s got a long row to hoe, but at least it’s profitable. As it stands, the company owes the U.S. Government $12.3 billion in funds received from the TARP program. That’s even after Ally’s already repaid $4.9 billion. There are glimmers of hope, though. Early figures estimate the company could raise $5 billion (per Reuters) from an IPO. That figure could grow as Ally’s IPO date nears, too.

While Ally owes the government $12.3 billion, the Treasury holds $5.9 billion in preferred stock. That means Ally actually needs to come up with just $6.4 billion to pay off the government (before any interest Uncle Sam decides to take). Total net revenue at Ally grew 22 percent last year to $7.9 billion. That was good enough $1.1 billion in profits.

2) New car anyone? I like to think of Ally as an extension of the auto industry. The bank, after all, funds 80 percent of all GM dealers and half of GM’s customers, according to the Capitalistpig Hedge Fund‘s managing member Jonathan Hoenig. Indeed, Ally financed 10 percent of all new cars sold in the U.S. last year. As the prospects for the auto industry improve, so too do Ally’s.

3) Diversification. To be successful moving forward, Ally will have to find creative new ways to make money. Mortgage lending rules will be tighter, and fees the bank can impose on its customers will be smaller. It’s clear the company must find new ways to make profits. That might not be as difficult as it sounds. When you’ve got $172 billion in assets, there are a lot of potential directions you can go in. Given Ally’s leadership in online banking and its early foray into subprime lending, the company has shown it’s not afraid of taking risks. If it makes better choices moving forward, this IPO could unlock a new and exciting chapter in the company’s future.

Bears will be bears: The bearish case against Ally is just as powerful as the bullish case, though. Since the company’s prospects are so pervasively intertwined with the fortunes of General Motors Company (NYSE:GM) and Chrysler, headwinds for American automakers mean headwinds for Ally. And gauging by the performance of GM’s stock since its IPO (down 10 percent), it looks like it’ll be a while before investors start jumping on the bandwagon again.

Then, there’s the pesky matter of dealing with regulators. Ally’s mishandling of foreclosures last year could ultimately lead to a multi-billion dollar fine from the government.

While the publicity surrounding Ally’s IPO will make it a tempting daytrade, it doesn’t take much looking to find companies with more intriguing growth profiles. Smaller companies might not have the name recognition of Ally, but they’ve probably got better financials – and that’s what matters in the long run. Until we see more innovation at Ally, there just isn’t a whole lot to get excited about.

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