What a difference a day makes. An analyst downgrades Tesla Motors (TSLA), one of its Model S electric cars bursts into flames, and its stock goes down in flames.
OK, referring to a 6% one-day drop as “going down in flames” is an exaggeration, but even prior to that series of unfortunate events, Tesla had been coming under fire. Skeptics question whether the California-based carmaker will continue its current rate of growth and stock performance or fizzle.
Considering Tesla’s market cap has revved up to $19.5 billion, some 40% less than General Motors’ (GM) and Tesla stock is trading for $180.95 compared to G.M.’s $34.95 a share, the concerns are legitimate. It’s only natural that some of Tesla’s fans sitting on 400% gains for the year might take some profits off the table.
Shoot, Tesla might even suffer a substantial pullback. A lower entrance point would make a whole new crop of fans very happy.
By all means, its stock is overvalued. That doesn’t negate its successful business model, or quality products, or rising demand. It doesn’t discount that the last time analysts labeled a car maker an “industry disruptor” was when Japanese manufacturers began selling cars in the U.S. during the 1970s.
Considering Tesla is being called the industry disruptor of 2014, I’m not concerned about Tesla’s growth.
- If Tesla didn’t have plans to roll out a crossover of the Model S in late 2014 and the first of its Gen 3 models costing half of its $71,000 luxury model in early 2017, I’d be concerned.
- If Tesla didn’t even consider ramping up annual production of its now prototype Gen 3 cars to 400,000 or more, compared with the 20,000 Model S sedans it will build this year, I’d be concerned.
- If it didn’t have the capacity to build 800 cars per week by late 2014 and 500,000 cars a year at peak production, I’d wonder.
- If Tesla hadn’t attracted multimillion-dollar supply contracts and investments from Japan’s Toyota Motor (TM) and Germany’s Daimler (DDAIF), I might be uneasy.
But they have, so I’m not.
Adding more fuel to Tesla’s fire is that the electric vehicles market in the U.S. is red-hot. Around 40,000 plug-in electric vehicles were purchased by Americans in the first six months of 2013, the U.S. Department of Energy says. That’s more than double from the year-earlier period. In 2012 some 52,000 EVs were sold, up from 17,000 in 2011.
That demand should grow as federal, state and foreign governments continue to provide incentives for buying electric cars, lower-priced models are released and as Tesla’s products gain in popularity overseas.
As far as this latest bump in the road . . . the Chevy Volt rebounded two years ago when battery fires broke out, and Ford (F) is still in business after recalling the Pinto in 1978 following gas tank explosions.
I’d just wait for all the noise to settle down and sellers to clear out, and buckle up for another profitable ride in 2014.