Tesla Motors this week hit an astounding value of $20 billion (billion with a bloody big B). Its shares are up just about 390% this year. As I write this, Tesla is valued at $20.2 billion, about 42% of GM’s $47.7 billion and about 31% of Ford’s $65 billion. There’s no way Tesla deserves this based on historical or current or even “coming soon” activity, as even Tesla CEO, founder, and Product Architect Elon Musk admits.
At the current stock price, Tesla is valued at about 260 times its projected 2013 earnings. That’s in stark contrast to GM (which sits at about 10 times its projected earnings) and Ford (which sits at about 11 times its projected earnings).
Yet some stock experts are saying that now is not the time to sell, and that Tesla’s long-term projections and value seem worth keeping the stock. Elon would say that this point of view is “generous.”
“I mean the market’s being very generous, and they’re obviously giving us a lot of credit for future execution, so we’ll do our best to honor the faith the market has placed in us…. But I really feel like the valuation we’ve gotten, that we have right now, is more than, is more than we have any right to deserve, honestly,” Elon recently told CNBC.
“We need to make sure we really knock the ball out of the park in the coming years.”
Why Tesla Stock Surged
There are a lot of reasons that can be together attributed to Tesla’s rise in the eyes of stockholders, not the least of which (imho) was the way that Elon and team set up a long string of positive announcements earlier this year. That’s when the rise really started and eventually took off.
But there’s one single underlying reason why that happened and why Tesla got to the point where it could make all those announcements.
That reason is that the Tesla Model S is a f***ing awesome car.
Consumer Reports gave the Model S its best rating ever (99 out of 100) and would have given it a score of 100 if more charging stations were around (which there will be before long).
True gasmobile lovers at Motor Trend named the Model S 2013 Car of the Year. There have been debates amongst these car experts and many others about whether or not the Model S is truly the best car ever built for a notably sized market.
The car is awesome.
Of course, that is the bedrock for all the other reasons Tesla’s stock rose, some of which includes the following:
- Model S manufacturing ramped up to satisfy the strong US demand for the car.
- Tesla made its first quarterly profit… and its second.
- Tesla paid back its US Department of Energy loan… 9 years early.
- Elon Musk and team announced a huge expansion of the Tesla Supercharger network (surely not possible if sales weren’t so good… thanks to the car being so awesome).
- Elon Musk has stated that Tesla will produce a much more affordable EV for the mass market by 2017 that will cost about half the price of the Model S. This would be Tesla’s big money-maker. (And people believe the target and believe the car will rock because of what Tesla has built to date and how well it has achieved its targets… despite so many strong critics.)
None of the above would have happened, been announced, or been in clear focus if the Model S wasn’t such an awesome car.
What does the future hold for Tesla and Tesla stock? It’s anyone’s guess on the latter, but on the former, I think you’d have to be something more than a pessimist to bet against the company.