Tesla's stock performance lately has been as electric as its Model S car. Shares are up more than 50% this year ... following a 335% surge in 2013!
So Tesla is either one of the most overvalued stocks trading right now or a screaming bargain, if you believe Elon Musk's company will really revolutionize the auto market in the next few years.
You might get more clarity when Tesla (TSLA) reports its latest earnings after the closing bell Thursday.
Wall Street analysts are expecting Tesla to post a sales increase of more than 46% in the second quarter, along with a small profit. But the numbers for the past three months aren't really what matter most to investors.
The main focus will be how many cars Tesla says it plans to deliver in the coming quarters. Investors will also be eager for more details about Tesla's gigafactory, a plant that will allow the company to produce more, lower-cost electric batteries that will be able to last longer between charges.
There have been several rumors on tech and automotive blogs in the past week that Tesla may announce that the gigafactory will be built in Nevada and that Tesla supplier Panasonic (PCRFY) may invest in it. The gigafactory could cost up to $5 billion to construct.
That's a lot of money. Even for Elon Musk -- the billionaire and creative muse for Robert Downey Jr.'s portrayal of Iron Man Tony Stark. (Will Tesla play some Black Sabbath as hold music before the conference call Thursday? Or maybe this great -- and strange -- jazz cover by The Bad Plus?)
Still, Tesla MUST make these types of investments. They are the key to its future success ... and it may be the reason why the stock is worth considering even though it trades at more than 200 times 2014 earnings estimates and nearly 75 times 2015 profit forecasts. (Roll over, value guru Benjamin Graham. Tell David Dodd the news.)
Investors have been excited about the rhapsodic reviews and sales for the Model S. Wall Street hopes the upcoming Model X crossover will be as big a hit.
But they really want the company's Model 3 or Model III (sadly not the Model E) mass-market car, which is likely due out in 2017 and expected to come with a price tag of about $35,000, to wow consumers.
The "cheaper" Tesla car is what Musk believes can turn the car maker into a true force to be reckoned with in the automotive world ... a legitimate powerhouse along the likes of Ford (F), General Motors (GM), Toyota (TM) and Honda (HMC), instead of just a "niche" electric car company.
Musk has an ambitious goal of 500,000 vehicle sales a year by 2020. To put that target in perspective, Tesla sold (or "delivered" in Tesla jargon) 22,450 Model S sedans last year.
Tesla will only be able to hit the half a million mark if it gets the gigafactory up and running soon. But one big Tesla bull thinks Musk's plan is doable. And that's why he believes the stock is still worth owning, valuation be damned.
Gilad Shany, an analyst with Baron Funds, says that if Tesla can sell 500,000 cars in 2020 ... and if you assume that the average selling price is around $50,000 to reflect a bigger portion of less pricey Model 3 sales than more expensive Model S and X vehicles ... then Tesla could wind up reporting $25 billion in annual sales.
He also thinks that Tesla's profit margins could be about 20%. Do the math and Tesla would be earning $5 billion. That's big league numbers, not start-up territory.
Shany works with the Baron Partners and Baron Opportunity Funds, which both own Tesla shares. He said those funds tend to own stocks for an average of seven years. So he's not going to bail on it because of what happens in one quarter.
"Tesla is the only auto company that can hire away from big tech companies in Silicon Valley. I know people who would die for a job at Tesla. That's a huge barrier for other auto companies to overcome," Shany said.
That all makes sense. But can Tesla really sell 500,000 electric cars in a world where gas guzzlers still rule the road? Shany said investors would be foolish to underestimate demand for electric vehicles.
Shany thinks the biggest factor holding back sales right now is the high price tag. He notes that two cheaper electric vehicles, the Nissan Leaf and BMW i3, have both had solid sales despite what he calls mediocre reviews for the Leaf and the fact that the i3 is meant to be a secondary "city driving" car.
Another valid point. But it still may be hard for average investors to wrap their head around the stock's lofty price. Cole Wilcox, CEO of Longboard Asset Management, said he no longer owns Tesla because he's concerned about the valuation. I spoke with Wilcox last year about why he liked Tesla so much.
But Wilcox said he sees better opportunities elsewhere in the electric vehicle market. His fund's second largest holding is BYD Company, a Chinese maker of electric cars and rechargeable batteries. That stock is expensive too ... the Hong Kong-listed shares trade at 52 times 2015 earnings estimates. But it's not as frothy as Tesla.
"This is the Tesla of China. The upside could be a lot bigger," Wilcox said.
But Wilcox is still a fan of Tesla's strategy ... and of Elon Musk. He said the only reason he sold is the high price. And even Musk has pointed out on occasion that Tesla's shares may be trading at a price that's higher than they deserve right now.
"I have no problem with the company. Tesla is still executing. Musk has done a fantastic job," Wilcox said. "But Tesla has a lot of work to do in order to grow into its valuation."
Well put. So if you are looking to trade Tesla, keep in mind that it is risky and volatile. There are still a substantial number of short sellers betting that the stock will go down. And even though shares are up a lot in 2014, the stock is about 15% off its all-time high. That could be a sign that momentum investors are nervous.
But if you are a long-term investor like Shany, then the stock could be worth it. Just don't panic if the stock plunges following earnings Thursday.
To quote Jim Morrison, keep your eyes on the road, your hands upon the wheel.
The break lights are finally coming on for investors' favorite auto stock.
Shares of Tesla Motors (TSLA) fell over 2% Tuesday after reports surfaced that Arizona failed to pass a bill to allow the company to sell cars directly to consumers.
It marks the fourth straight day of losses for Tesla's stock.
It's unclear what effect the Arizona bill actually had today. The automaker has long sought to bypass dealerships because it says MOREJesse Solomon - Apr 15, 2014 3:49 PM ET
Boring is back.
In a choppy market, investors are shifting their strategy, eschewing the once sizzling sectors (think: tech) in favor of the more mundane variety (think: utilities).
Dividend-paying companies, long-considered a tad too defensive, are especially in vogue now.
Red hot names such as Tesla (TSLA) and Netflix (NFLX) have tumbled this month, while utility stocks, known for their healthy dividends, have jumped. The Utilities Select Sector SPDR Fund (XLU) is up over 9% this year. Its top MOREJesse Solomon - Apr 7, 2014 4:02 PM ET
Elon Musk made his mother proud Monday.
The tech mogul's electric car company, Tesla Motors (TSLA), narrowly beat out Google (GOOG) in CNNMoney's fourth annual March Stock Mania contest. In the final round, Tesla took home 52% of the vote in this year's competition, compared with 48% for last year's champ.
The victory did not go unnoticed. After CNNMoney's Paul R. La Monica posted the news on Twitter early Monday, Musk's mother, MOREBen Rooney - Mar 24, 2014 12:00 PM ET
Tesla was Wall Street's "It" stock of 2013. Nothing much MOREPaul R. La Monica - Feb 18, 2014 1:52 PM ET
So much for the Santa Claus rally that tends to lift MOREPaul R. La Monica - Dec 17, 2013 3:10 PM ET
Good news for Tesla investors! You don't need as many bitcoins to buy MOREPaul R. La Monica - Nov 19, 2013 1:19 PM ET
Tesla shares (TSLA) made a run at record highs early Friday in a burst of optimism following an upgrade by Deutsche Bank.
But the stock struggled to hold the $130 level as the morning wore on, sparking a debate on StockTwits over how much the electric car maker is worth.
The sky's the limit, say the bulls.
$TSLA so the only question is... all time high before of after lunch? MORE
Investors can't seem to get enough of Elon Musk, but the Tesla CEO's announcement failed to generate much excitement on Monday.
Will publish Hyperloop alpha design by Aug 12. Critical feedback for improvements would be much appreciated.
— Elon Musk (@elonmusk) July 15, 2013
Musk has been talking about the hyperloop, an idea for a rapid transportation system, for about a year now, but details have thus far been limited. At the recent D11 MOREHibah Yousuf - Jul 15, 2013 2:59 PM ET
Tesla's stock soared into record territory Monday after the electric car maker received another upgrade from Wall Street analysts.
Tesla (TSLA) shares ended the day at a record $117.18, gaining more than 9%.
The rally came after analysts at Jefferies raised their price target to $130, saying the company is likely to report stronger-than-expected sales of the new Model S this year.
Tesla's stock price has exploded. It's gained a whopping 240% in the past MOREBen Rooney - Jul 1, 2013 4:45 PM ET
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