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

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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.”

The stock’s gone too far, too fast, he believes, saying that it’s evidence that the Fed’s money printing is leading to excesses. It took just 33 months for Tesla’s value to rocket up 14x. That’s unheralded and excessive, especially when you look at the premium Tesla’s got over its peers.

Over the past 12 months, Tesla booked sales of $2.9 billion. That means they’re trading at a multiple of 12x sales. Consider this: their peers trade a 0.5 multiple! That means Tesla’s share premium is 24x that of Ford or GM.

If Tesla can grow sales to $50 billion, Stockman believes, perhaps it’ll justify the company’s share price. Otherwise, investors are rolling the dice when they go long Tesla.

“During its entire seven years as a public filer, Tesla has failed to generate any net operating cash flow (OCF) at all and has, in fact, posted red ink of $500 million on the OCF line. During the same seven-year span ending in Q4 of 2014, its capex amounted to a cumulative $1.8 billion.

So go figure. Combining OCF and capex, you get a balance sheet hemorrhage of nearly $2.4 billion. The real question, therefore, is not why Tesla was worth $35 billion, but why it wasn’t bankrupt long ago?”

It’d be easy to brush off Stockman’s cautionary warnings if it weren’t for his great credentials. He served as a Republican US Representative from the state of Michigan (1977-1981) and as the Director of the Office of Management and Budget (1981-1985). I’m guessing he’s also shorting Tesla.

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