Look How Far Tesla Stock Has Come
Henry Ford was, by all accounts, a cantankerous egomaniac who willingly courted controversy. But his Ford Motor (NYSE:F) Model T, a cheap, gas-powered car dressed all in black, transformed America. Elon Musk is also a cantankerous egomaniac. He also courts controversy. But his Tesla (NASDAQ:TSLA) roadster has transformed the car business in just a decade, as it created the first mass-produced electric luxury car.
Source: Tesla
You take visionaries as they are, warts and all. Tesla has succeeded beyond the dreams of anyone but Musk. Tesla produced 350,000 cars in 2018, earning almost $140 million, 78 cents per share fully diluted, on revenue of $7.2 billion.
Tesla produced 63,000 more cars in the first quarter, but lost $702 million, $4.10 per share, on revenue of $3.5 billion.
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Analysts are calling for Musk’s head. Are they right?
The Future of TSLA Stock
Firing Elon Musk today would be like firing Henry Ford a century ago. He is what he is. You get what you get.
I wrote almost three years ago that scaling production would be Tesla’s biggest challenge, and that it has proven to be. Musk has learned robots can’t do it all, yet. But Tesla’s second factory, in Shanghai, could be churning out 2,000 cars per week by year-end, another 12,000 Teslas were sold in April, and Tesla now leads a market with dozens of competitors.
Tesla is also working through a global battery backlog, and cutting the price of its solar panels, although those operations also hit a short-term bottom during the first quarter.
Tesla’s problems today are more those of a successful operating company than a start-up. The stock is still pricey compared with other auto stocks, at roughly two times sales. But other auto stocks don’t offer Tesla’s growth.
Tesla will be selling new stock over the next three years to raise cash for its expansion. This includes the production of a fully autonomous car, a compact SUV and a pick-up, along with a dramatic increase in battery production.
Ford’s success drove the gasoline-powered infrastructure that still dominates our roadsides. Now Tesla will be building its own electric “gas stations,” complete with restaurants.
The point is, Tesla is still growing fast. Revenue for the current quarter is estimated at $6.5 billion, nearly double the last quarter, with sales for 2020 reaching about $32 billion. If it can even come close to those targets, Tesla stock should look like a bargain at current prices.
But analysts disagree on whether Tesla will make its goals, and the value of doing so. Ford, which just passed Tesla in market cap last month, brings in close to $40 billion every quarter. Ford’s not growing, but its dividend yields over 5.8% at current prices, and Tesla doesn’t even make money.
The Bottom Line
In the past I’ve been as hard on Tesla as anyone.
I’ve called it a bubble stock, I correctly predicted its fall last September, and I asked if Musk’s magic was gone in March, when Tesla’s value fell back below that of General Motors (NYSE:GM).
But only a fool would have bet on Elon Musk 10 years ago, and only a fool would bet against him now. And there are a lot of fools — over 26% of Tesla’s float today is still short.
Musk has always claimed to hate shorts, but they’re his stock’s secret weapon. Shorts have borrowed their shares and must, at some point, buy them back to repay the loans.
I suspect the next big move in this stock will be up.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.
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