Talk of Tesla being an acquisition target is a silly idea, says one portfolio manager.
File this under: Not any time soon.
Talk of Tesla being an acquisition target for one of the big three started earlier this week when Yra Harris of Praxis Trading gave what he described as a "way out" 2014 prediction to Rick Santelli on CNBC's "Squawk on The Street":
"I would say that GM buys Tesla because it's such a perfect fit. Imagine the high-luxury vehicles, lulling people into a Cadillac dealer. Then they get the showrooms that everybody is beating them up about. But, of course, it would depend upon what valuation. Right now, to me, Tesla values are in La La Land, but at a reasonable valuation based on growth..."
Should Tesla investors get excited? Not so fast, says Chad Morganlander, portfolio manager at Washington Crossing Advisors.
|Market cap||$57.0 bln||$60.3 bln||$18.6 bln|
|Revenues (ttm)||$154.25 bln||$142.50 bln||$1.7 bln|
|Net income (ttm)||$3.75 bln||$6.07 bln||-$0.15 bln|
|Cash||$26.81 bln||$24.18 bln||$0.80 bln|
|Vehicles sold (ytd)||2,555,921||2,268,644||21,500|
"This deal would not make sense at this valuation at all," says Morganlander. "They'll only do $3 billion in revenue and they are going to earn perhaps $1.50 a share in 2014."
Given General Motors' market cap and revenues, Morganlander says such a deal "would be extraordinarily dilutive."
"It wouldn't make sense from a strategic acquisition or for a private equity firm to do a financial acquisition. It's just a silly idea. It’s not going to happen."
GM may not be buying Tesla shares any time soon, but should investors?
Jeff Tomasulo, managing partner at Belpointe Alternative Investments, sees recent price movements in Tesla's charts as offering reference points for the stock. He sees it now within a range of $120 and $160 per share.
"So, $120 is a nice support level I would be looking at," says Tomasulo. "If it could get above that $160 level, then maybe we could get an up move to the old highs."
To see what Morganlander and Tomasulo think is next for Tesla's stock, watch the video above.
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