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

Cook Talks to the Chinese Authority on the Security of User Data on iCloud
Cook Talks to the Chinese Authority on the Security of User Data on iCloud
The Apple CEO has a conversation with the high Chinese officials regarding the iCloud user data security threat
 
 
A8X Chip of the iPad Air 2 Reportedly Contain Triple Cores
A8X Chip of the iPad Air 2 Reportedly Contains Triple Cores
Along with the triple-core A8X chip, the iPad Air 2 is said to feature the 2GB RAM
 
 
Apple And IBM Unveiling Start Of Their Partnership
Apple And IBM Unveiling Start Of Their Partnership
Next month brings the first part of a fruitful relationship
 
 
Apple Wants 64-bit Apps By February
Apple Wants 64-bit Apps By February
The performance boost will help keep them on top
 
 
 

Latest from the Network

European Champions League standings
Paris, Oct 22 (IANS) Following are the European Champions League standings for Groups E to H after Tuesday's matches (tabulated under matches played, won, drawn, lost, goals for, against, points), according to Xinhua...
Read more on Sport Balla
 
Rogerio set to break Giggs world record
Rio de Janeiro, Oct 22 (IANS) Sao Paulo goalkeeper Rogerio Ceni is one victory away from earning his fourth Guinness World Record by eclipsing a mark held by Manchester United legend Ryan Giggs. The 41-year-old will...
Read more on Sport Balla
 
Ryan Reynolds can't keep his hands off Blake Lively
Ryan Reynolds was ''really sweet'' to Blake Lively at the Angel City Ball. The couple, who got married in September 2012, made their first red carpet appearance together in New York City on Monday night (10.20.14) since...
Read more on Celebrity Balla
 
Kris Jenner doesn't know who Bruce Jenner is dating
Kris Jenner has ''no idea'' whether Bruce Jenner is dating her best friend. The 58-year-old reality TV star, who split from the Olympic gold medallist last October after 23 years of marriage, claims she doesn't know if...
Read more on Celebrity Balla
 
When Rihanna dressed like 'Harry Potter'
New York, Oct 22 (IANS) Singer Rihanna was spotted here in a Harry Potter style costume. She wore the wizard-like get-up while heading for a business meal here Monday, reports mirror.co.uk. The 26-year-old combined a...
Read more on Celebrity Balla
 
Germany raises humanitarian aid to Iraq
Berlin, Oct 22 (IANS) Germany has pledged a further 20 million euros (about 25.5 million dollars) in humanitarian aid to Iraq, the foreign ministry said in a statement Tuesday. The additional funds are immediately...
Read more on Politics Balla
 
India calls on Israel, Palestine to resume peace process
United Nations, Oct 22 (IANS) India has called upon Israelis and Palestinians to resume the peace process as "dialogue remains the only viable option" to address the issues confronting the region. In a brief statement...
Read more on Politics Balla
 
Airstrikes help ground forces fight IS: Pentagon
Washington, Oct 22 (IANS) Kurdish forces are in control of the majority of the Syrian city of Kobane despite efforts by the Islamic State (IS) to take the town, a spokesperson for US defence department said Tuesday....
Read more on Politics Balla
 
Palestine, Israel urged at UN to halt unilateral initiatives
United Nations, Oct 22 (IANS) UN Secretary-General Ban Ki- moon Tuesday called on Palestine and Israel to overcome differences and halt unilateral initiatives that fuel mistrust, so as to pursue long-term stability in...
Read more on Politics Balla
 
China urges Israel to create conditions for peace
United Nations, Oct 22 (IANS) Chinese government has called on Israel to create necessary conditions for the resumption of peace talks with Palestine. At an open debate of the Security Council on the situation of the...
Read more on Politics Balla