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 Apple

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 Apple

 
 

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

A8 Chip of iPhone 6 and iPhone 6 Plus Can Handle 4K Videos
A8 Chip of iPhone 6 and iPhone 6 Plus Can Handle 4K Videos
The WALTR developers find a great function of the A8 processor in the iPhone 6 and iPhone 6 Plus
 
 
$1 Samsung Galaxy S5 Best Buy Black Friday Deal is on Sale Now
$1 Samsung Galaxy S5 Best Buy Black Friday Deal is on Sale Now
The Best Buy Black Friday 2014 Deal on the Samsung Galaxy S5 is live now. You pay $1 on contract for the Samsung Galaxy S5.
 
 
The Best Black Friday iPad Deals
The Best Black Friday iPad Deals
The Apple iPad Black Friday 2014 Deals started to sell.
 
 
Amazon Black Friday 2014 Sale has Started
Amazon Black Friday 2014 Sale has Started
The Amazon Black Friday 2014 sale is officially here. Earlier than ever Amazon offers Black Friday 2014 deals.
 
 
 

Latest from the Network

Mila Kunis: Jupiter Ascending was like boot camp
Mila Kunis and Channing Tatum ''got in trouble'' for losing too much weight filming 'Jupiter Ascending'. The 31-year-old actress - who has two-month-old daughter Wyatt with fiancé Ashton Kutcher - admits the futuristic...
Read more on Movie Balla
 
Force India finish sixth in 2014
Abu Dhabi, Nov 23 (IANS) Formula 1 team Force India ended their 2014 season in sixth position in the constructors' championship as its drivers Sergio Perez and Nico Hulkenberg brought home 28 points from the season-...
Read more on Sport Balla
 
Hamilton seals F1 drivers' title with Abu Dhabi win
Abu Dhabi, Nov 23 (IANS) British racing driver Lewis Hamilton clinched his second Formula 1 drivers' title as he comprehensively won the season-ending Abu Dhabi Grand Prix at the 5.5 km Yas Marina Circuit here Sunday...
Read more on Sport Balla
 
14 killed in Afghanistan bombing
Kabul, Nov 23 (IANS) At least 14 people were killed and 35 wounded Sunday in a suicide bomb attack at a volleyball ground in Paktika province of Afghanistan, a source said. "The blast occurred late in the evening....
Read more on Politics Balla
 
Hamilton wins Abu Dhabi GP, World Championshi
Abu Dhabi, Nov 23 (IANS) Mercedes driver Lewis Hamilton comprehensively won the season ending Formula 1 Abu Dhabi Grand Prix and in the process also clinched the drivers' World Championship for the second time here...
Read more on Sport Balla
 
Iraqi forces attack IS-held towns
Baghdad, Nov 23 (IANS) Iraqi security forces attacked two towns held by the Sunni radical group Islamic State (IS) in Iraq's eastern province of Diyala Sunday, police said. Security forces backed by Shia militias and...
Read more on Politics Balla
 
Walmart, Best Buy, Amazon and Sam's Club Black Friday 2014 Sales are Live
The big retailers cannot wait this year and launched Black Friday 2014 sales as early as Friday. These sales are the real deal offering deals that are advertised in Black Friday 2014 Ads. On Friday Walmart Black Friday...
Read more on Black Friday Countdown
 
Pune FC seal semifinal berth in King's Cup
Thimphu, Nov 23 (IANS) Pune FC thrashed Assam State Electricity Board FC 5-0 in a third round Group-B encounter to seal their place in the semi-finals of the 2014 King's Cup at the Changlimithang Stadium here Sunday....
Read more on Sport Balla
 
Australia the team to beat at World Cup: Vaughan
London, Nov 23 (IANS) Former England captain Michael Vaughan Sunday said that having hit upon a rich vein of form against South Africa, Australia have emerged as the front-runners and will be the team to beat at the...
Read more on Sport Balla
 
Taylor Swift to receive Dick Clark Award
Los Angeles, Nov 23 (IANS) Singer Taylor Swift has been named as the first recipient of Dick Clark Award For excellence at 2014 American Music Awards (AMAs). The 24-year-old, who is enjoying a great year with her...
Read more on Celebrity Balla