Buying Tesla Means Paying For Everything You See And Some Things You Can't

Mar 18 2014, 10:56am CDT | by

Buying Tesla Means Paying For Everything You See And Some Things You Can't
Photo Credit: Forbes Auto

With U.S. stocks grinding through the first quarter of 2014, many of the last year’s darlings have scuffled. One that hasn’t is Tesla Motors, up more than 50% year-to-date and trading at more than $236. In a note Tuesday Goldman Sachs analysts upped their price target to $200 but said the stock could be worth anywhere from $66 to $478.

Goldman’s Patrick Archambault, whose price target has lagged Tesla’s dizzying rise, details three “disruptive outcomes” that could mean Tesla stock is still cheap at current prices, but each scenario requires ramp-ups in line with some legendary growth patterns.

The volume trajectories of the iPhone – Archambault’s “Elon Musk as Steve Jobs” scenario – and consumer durables – “ Elon as the Maytag Repairmen” – suggest that popular consumer goods experience an initial bout of rapid growth followed by a slowdown five years in as competition crops up and pricing power may diminish.

In those cases, Goldman projects a global electric vehicle market of 4.7 million or 3.3 million cars, with Tesla accounting for more than half the market. While both seem bullish, if Tesla’s is leading an automotive boom to match Henry Ford’s Model-T, Archambault says it would imply “a fairly unwavering growth pattern” that would put the electric vehicle market at 6 million units in five years and Tesla at 3.3 million.

The analyst is quick to admit that that case, which suggests a present stock value of $478, and the two others, are not likely to be borne out fully. Goldman assigns just an 8.3% likelihood to each, compared to a 25% chance of a slower acceleration in electric vehicle adoption that could mean the stock is worth just $66.

For Tesla investors, the bull case is compelling, but even long-time holders acknowledge there is an element of faith to the holding.

“With Tesla you’re paying for everything you see and a couple of things you can’t,” says Drew Cupps, founder of Chicago-based Cupps Capital Management. “Six months ago I didn’t know the term ‘gigafactory,’ but I knew they had visionary management.”

Cupps, who has owned Tesla since its 2010 IPO, taking some profits along the way, owns the shares because of he believes the company is way ahead of any competition in the electric vehicle space. If electric cars are a transformative technology and Tesla is moving faster than anyone else in the space it will be difficult for them to get caught, Cupps figures, so he isn’t worried about the quarterly or whether a particular sales figure might disappoint.

In Goldman’s view, Tesla’s current automobile business is worth $180 and the “stationary storage” business – driven by the planned “gigafactory” – is worth another $20. If Cupps is right, both could be worth considerably more.

There is always the risk that a fast-growing company might not achieve all its potential. “Any whiff of doubt, they get hit,” Cupps says, but he adds that any blue-chip company today once faced the very same questions.

Tesla’s most recent headwind has been New Jersey’s decision to disallow its direct-sales model, but the auto industry at large is rarely without its challenges. Consider the recent General Motors recalls, which have put a spotlight on Chief Executive Mary Barra and prompted the automaker to create a new position for a global vehicle safety executive.

TSLA data by YCharts

Follow @SchaeferStreet

Source: Forbes Auto

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

IPad Air Giveaway 2014 is Online
IPad Air Giveaway 2014 is Online
Our sister site I4U News is giving away a brand new iPad Air or if you can wait an iPad Air 2. This is an $499 value.
 
 
Your Parent Or Kid Moved In: Are You Covered?
A record 57 million Americans now live in multigenerational family households — double the number in 1980, according to a new Pew Research Center study. And I bet many of them have the wrong homeowner’s or renters...
 
 
Pandora Looks to Challenge Terrestrial Radio's Dominance in Cars
Pandora Media is one of the largest Internet radio providers in the U.S. with more than 75 million active users. While the company’s active user count has increased at a robust pace historically, it is likely to slow...
 
 
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
Are General Manager Salaries About To Skyrocket? Will There Be A Front Office Salary Cap?
It’s January 2026. New York Yankees owner Hal Steinbrenner gets out of his driverless car and triumphantly marches before the gathered press to introduce his prized new free agent. It’s a record-breaking contract—over...
 
 
 

Latest from the Network

Watch your diet to reduce diabetes risk
London, Sep 3 (IANS) What you eat and drink, and not just the number of calories, is a significant factor in diabetes risk, a study showed. Losing weight may be good but not enough to prevent Type 2 diabetes as...
Read more on Celebrity Balla
 
35 militants killed in Afghanistan
Kabul, Sep 3 (IANS) At least 35 Taliban militants have been killed in fresh military operations across Afghanistan, the interior ministry said Wednesday. The Afghan National Security Forces (ANSF) carried out...
Read more on Politics Balla
 
Vince Vaughn for The Politician?
Vince Vaughn is set to star in 'The Politician'. The 'Wedding Crashers' star is attached to take on the lead role in the upcoming Columbia comedy about a scandal-hit politician, according to The Hollywood Reporter. The...
Read more on Movie Balla
 
910 militants, 82 soldiers killed in North Waziristan
Islamabad, Sep 3 (IANS) At least 910 militants and 82 Pakistani soldiers have been killed in operation Zarb-i-Azb in North Waziristan, the military said Wednesday. The statement issued by the Inter-Services Public...
Read more on Politics Balla
 
'Headscarf instils positive body image in British Muslim women'
London, Sep 3 (IANS) British Muslim women who wear a hijab (headscarf) generally have a more positive body image, are less reliant on media messages about beauty ideals and place less importance on appearance than...
Read more on Celebrity Balla
 
Console games new threat to global climate: Study
New York, Sep 3 (IANS) Console games downloaded over broadband internet are causing more greenhouse gas emissions than Blu-ray discs delivered via retail stores, new research reveals. It is not always true that...
Read more on Celebrity Balla
 
Human greed driving species towards extinction: Study
Washington, Sep 3 (IANS) In a disturbing trend, scientists have reported that species are becoming extinct as much as 1,000 times more frequently - 10 times worse than the previous estimates - owing to human population...
Read more on Politics Balla
 
Kelly Brook's traumatic childhood
Kelly Brook has opened up about ''violent and horrific'' memories from her childhood. The 35-year-old actress has revealed that although she enjoyed some aspects of growing up on a council estate in Kent, South East...
Read more on Celebrity Balla
 
Emmy Rossum not 'easy'
Emmy Rossum insists she's not ''easy'' like her 'Shameless' character. The 27-year-old actress stars as Fiona Gallagher in the US remake of the hit series and she's revealed that although she's had sex on a first date,...
Read more on Celebrity Balla
 
2016 NASA asteroid mission awaits your messages
Washington, Sep 3 (IANS) NASA has invited the public to submit short messages and images on social media that could be placed in a time capsule aboard a spacecraft to be launched in 2016 for an asteroid study. Called...
Read more on Apple Balla