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 Q4 earnings preview (TSLA)

Don’t expect a profit heading into Tesla Motors Inc.’s (NASDAQ:TSLA) earnings report, but that doesn’t mean you shouldn’t expect big things from the Silicon Valley car company.

Valuing shares in a stock that’s yet to post a profit is like throwing darts at balloons at the carnival. You feel like you should be able to do it (and you can every now and then), but you’re going to lose a lot of money in the process. Still, this is what we know going into Tesla Motors Inc.’s (NASDAQ:TSLA) earnings report that’s due after trading hours on Tuesday:

1) An upside surprise. Tesla reported a loss of $0.38 per share in Q3. Analysts were calling for a wider loss of $0.43 per share. Revenue grew by $2.8 million last quarter, and investors were clearly cheered as the stock rose 40 percent on the news. Its since given back all those gains.

2) Another loss on the way. Analysts are calling for a loss of $0.50 per share in Q4. If we get another pleasant surprise (meaning the company’s frittered away less money than analysts thought), we’ll likely see another surge in the company’s share price.

3) Tax credits could boost the bottom line. Nothing concrete has happened yet, but the White House has floated the idea of offering a $7,500 tax incentive for electric vehicles. If such a measure passes, it will, undoubtedly, benefit Tesla, and that should have a positive impact on the stock.

4) Beautiful lines. Tesla’s Model S is gorgeous. I don’t care if you’re talking about gas, bio-diesel or propane-powered tractors, the Model S will be one of the sexiest vehicles on the road when it debuts next year. That should drive strong sales, even with an expected retail price around $57,000.

5) Share dilution anyone? Tesla’s pushing hard to get its third car, the hush-hush all-electric Model X SUV on roads by 2014, but they’re going to need a cash infusion to do it. “It could be a secondary [offering] or a strategic investment,” Tesla CEO Elon Musk said last week. “There is no shortage of interest.” If the company can surprise investors to the upside on Tuesday, a dilutive stock offering would be better received than it would on the heels of bad news. Maybe that’s their plan?

6) Keeping your enemies close. Rather than trying to strong-arm its way into the auto industry, Tesla has worked hard to position itself as a car maker and a parts supplier. Toyota gave Tesla a good deal on its sprawling NUMMI plant in California. In exchange, Tesla landed a gig as the power train supplier for Toyota’s RAV4 EV. If the RAV4 sells well, Tesla does well, too – meaning they’ll have more (much-needed) revenue to add to their balance sheet. The company has also forged partnerships as a battery supplier for the Mercedes A-Class and Freightliner trucks.

7) It’s not about the numbers. Tesla’s shares aren’t trading on dollars and cents; they’re trading on the assumption that one day the company will be making cash. No one expects a profit anytime soon. As the company adds more vehicles to its line (including a rumored “economy” car after its Model X SUV) and inks more deals as a supplier, expectations will start ratcheting up. Unless fuel prices magically start falling, though, I see no reason why Tesla won’t be able to compete with the world’s largest car companies in the years to come.

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Should I buy Tesla stock? (NASDAQ:TSLA)

Yes, their stock looks overpriced, but here are three reasons why I say still Tesla’s a buy.

At a time when car manufacturers are building boxy-looking electric vehicles that have the sex appeal of a Rubix Cube with its stickers torn off, Tesla Motors, Inc. (NASDAQ:TSLA) makes sleek, lust-worthy, high-end speed demons.

The luxury electric car maker epitomizes a sexy stock with its David-versus-Goliath attitude and tech start-up management style. That’s not to mention the fact that the company’s at the cutting edge of an industry that just might revolutionize the way Americans travel.

Still, I keep teetering back and forth on whether or not I should buy into Tesla. It’s hard to believe the founder of PayPal could decide to take on monolithic heavyweights like General Motors (NYSE:GM), Ford (NYSE:F) and Toyota Motor (NYSE:TM) and actually get in a few punches. There are a raft of start ups to deal with, too (like Warren Buffet’s pick, BYD Auto).

And yet, Tesla seems to be doing everything right. Their designs are strikingly beautiful. Their partnerships have been designed to make them an integral part of the supply chain for larger companies, and they’re attracting capital from the same companies they’re supposed to be competing with. There just might be something to this stock, after all. Indeed, here are three reasons why I say Tesla’s a buy:

1) Innovative technology. Tesla’s batteries are actually groups of batteries. Rather than building one massive unit, they link together thousands of small lithium-ion batteries (much like laptop batteries) in every car. According to the Mercury News, this keeps their costs lower than the larger lithium batteries used in the Nissan Leaf and the Chevy Volt. Lower costs per car means more profits despite what might be a lower sales volume than their competitors will snag. Indeed, Tesla’s battery costs per kilowatt hour are estimated to be a quarter of the cost of equivalent power for the Leaf and the Volt.

2) Great management. Tesla’s co-founder Elon Musk nearly bankrupted himself trying to get Tesla’s first cars to the market. He’s got the proverbial “skin in the game,” and that means he’s going to do everything in his power to see the company succeed. This wouldn’t mean much if Musk didn’t have a track record for creating game-changing companies. He did just that in 1999 when he helped launch PayPal.com. PayPal was acquired by eBay Inc. (NASDAQ:EBAY) for $1.5 billion just two years later.

3) Well-placed partnerships. You’d think Toyota wouldn’t want to give a penny to Tesla, but they’ve actually hired the company to produce the electric components for their upcoming RAV4 electric SUV. Tesla will generate some $60 million in revenue from the deal, and the company will be able to refine their manufacturing process as they turn out the batteries, motors and other components for the RAV4.

This has been part of Musk’s plan from the very start: if Tesla can become not just a manufacturer of EVs, but a electric powertrain supplier for some of the world’s biggest carmakers, it’ll have its fingers in a much larger piece of the pie, and I suspect that will pay off in the end.

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