Tesla stock is down almost 10% today, after its 2012 earnings report became public. Tesla missed its projections and investors hammered the stock in response. So what did I just do? I just bought a lot of TSLA. Why did I do it? Because I'm betting on Elon.
There's a SeekingAlpha analyst report that's very bearish on Tesla stock. The author writes:
"Tesla's current market value is 250 times higher than it would be if it were being valued as a car manufacturer rather than an idea whose time is about to come. If Tesla were valued as a car manufacturer at Ford's valuation ratio, it would have to produce about 440,000 cars each year. That's over 20 times its current production goal. Are there that many luxury car buyers out there who are willing to live with the limitations of an electric car? It seems doubtful to me."
Here's the problem with the author's perspective: He doesn't understand Elon's master plan, nor does he appreciate Elon's "relentlessly resourceful" ability to execute on that plan.
If you just consider TSLA stock based on what the company has achieved to date, I'd agree that the stock's price is still inflated beyond what its current-day business metrics would justify. As the analyst points out:
"If Tesla were valued as a car manufacturer at Ford's valuation ratio, it would have to produce about 440,000 cars each year. That's over 20 times its current production goal. Are there that many luxury car buyers out there who are willing to live with the limitations of an electric car? It seems doubtful to me."
But here are a few counter points to consider:
- Elon's plan isn't to stop at the Model S. He's meticulously created a down-market strategy, starting with a low-production, expensive luxury Roadster model to iterate on the core technology fundamentals, and now with the Model S, and soon Model X SUV, which competes in the luxury sedan market (think BMW M5 or Audi S4 buyers), and then next he'll produce a sub $30k mass market vehicle. Tesla absolutely will get to Ford's volume production numbers with this strategy; but Elon is stoking demand every step of the way.
- Speaking of stoking demand, there's a long waiting list of passionate buyers waiting to get the Model S or X. I'm one of them (that's my Model X, reservation #486, in the picture above). People want what Tesla is building, and they can't churn them out fast enough.
- That leads me to the next, and arguably most important point: Tesla is making a quality product with incredible market timing. The Model S was awarded Motortrend's "Car of the Year" award. It has many rabidly passionate enthusiasts already. Gas prices are rising, and federal efficiency standards are squeezing auto manufacturers. Tesla has a core expertise in creating batteries that other manufacturers will need, as evidenced by the Mercedes B class that will use Tesla batteries and the Toyota RAV4 that already does. The Model S can outrace a BMW M5 -- if that's not enough to get middle aged men's hearts beating like they were 14 again, I don't know what is.
But my last point is that I'm specifically betting on Elon Musk, the CEO of Tesla. He has single handedly pushed Tesla through tremendous obstacles to get it to where it is today. Above all else, I believe in Elon. I don't care if Tesla stock drops even more; I'll just keep buying it because it'll be on sale. If there's anyone that can create a new mass market car company -- which nobody has been able to do since the 1920's -- it'll be Elon.