The Rise Of Tesla Stock And Big Auto’s Lack Of Focus

What is driving Tesla Stock Higher Now?

Three recent news items are responsible for driving Tesla’s (TSLA) stock higher in the last few days:

1. Chinese Website – Tesla opened a Chinese website where they are taking $40,000 deposits for the Model S. This is equivalent to the Signature deposits so it is possible that the Model S Signature is coming to China.

2. Swiss and German Superchargers – Tesla opened up it’s first Swiss supercharger and it’s first German Superchargers.

3. Jan 2015 Unveiling of the Model E – This surprising news now puts a clearer timeline to the Model E, potentially putting a launch date of the car at end of 2016 to 2017 based on the Model X timeline.

My personal opinion is that the last item is what caused the stock to move. I have been covering Tesla, here at Seeking Alpha, for a while now. Every article I write about Tesla brings out at least one thread of comments, that other auto manufacturers will catch up before Tesla’s Gen III launches with a viable (long range) and affordable electric car. The other common thread in many Tesla related articles attempts to cast doubt on the greenness of electric vehicles, which I discussed here.

I have touched on GM’s (GM) Cadillac ELR before and with this article I hope to compare future and current electrics and how automakers lack of focus is preventing this from happening.

Automaker Focus

For someone who wishes to use an electric car as their only vehicle, the only current viable option is a Tesla. My wife and me use her Nissan (NSANY) Leaf as our primary vehicle but we still need a gas car for weekend trips or when we need the cargo room of an SUV. The Leaf is a very economical car to lease, especially after fuel savings.

When we leased the Leaf, there were only three available electric car options –

Mitsubishi i Too basic and yet expensive
Nissan Leaf Best choice, decent price for available features
Ford (F) Focus Similar features to Leaf, arguably better battery but too expensive

When it comes time to replace the Leaf, we will have one additional option, the BMW i3. It is possible that the Honda (HMC) Fit EV, GM Chevy Spark EV, Mercedes B Class Electric, Toyota (TM) Scion EV also make it nationwide by then. However, all these vehicles have the same problem as the Leaf – range limited to only in-city, daily commute kind of driving.

When it is time to replace that next car, I’m now even more hopeful that the Tesla Gen III will be an option. What this will offer us is a 200 mile range. Maybe more, if we decide to spring for a bigger battery. At this point our second car would be relegated to either one or two annual trips or trips where we need the cargo room of an SUV – I’m assuming here that the Model E will have a lot more cargo room than the Leaf, considering that the Model S has more cargo room than many compact SUVs like the Audi Q5. Alternatively, if the Tesla Gen III SUV is imminent, we could go completely Electric with a Leaf and a Tesla SUV, hopefully with solar panels.

All this while, not a single automaker has announced or even talked of plans of a long range electric bigger than a very compact car. The only rumors are those of a BMW i5 – possibly a stretched out BMW i3. So the range will still be inferior to the Gen III and it is very doubtful that BMW can bring this car to the market in time to compete with the Gen III.

Instead of focusing on bringing a better electric car, manufacturers are giving us cars which are limited to a few states and designed for regulation compliance. At the same time, they are planning on launching Fuel Cell cars, which are no more than a joke. There is no infrastructure to support fuel cells. These cars will also be limited to small markets and extremely expensive compared to electrics.

Nissan has announced one potentially promising electric car – the Infiniti LE – but that has been indefinitely delayed and no details about range were ever made public. So even Nissan, the automaker with the largest electric focus is far behind Tesla in providing a viable electric car.

Almost all big auto makers are working on too many things simultaneously and so far have been unable to provide any really exciting viable green car. If manufacturers really want us to believe in fuel cell cars, they need to start investing in fuel cell infrastructure first. Just like Tesla is investing in Superchargers.

It is this lack of focus that is providing and will continue to provide Tesla room to grow unabated. This is not even considering other things that a Tesla brings to the table like Wifi updates. We just got our first recall for the Leaf – a software update for which we need to go to the dealer. And this doesn’t even take into consideration that it is not just Electrics that Tesla competes with. The Gen III will compete with every other luxury car.

Even amongst super-cars the major names like Ferrari, Lamborghini, Porsche, McLaren etc. are completely avoiding electrics while embracing hybrids. This will make room for small auto makers and new comers to spring up. That is how Tesla started with it’s Roadster. Now we haveDetroit Electric and the latest announcement from Saleen Automotive (SLNN) that they plan to make a new electric car.

Comparing Tesla Valuation With Other Automakers

recent Seeking Alpha article discussed how overvalued Tesla is compared to other manufacturers by looking at their P/S ratio.

TSLA Revenue (Quarterly) Chart

However, what the author fails to take into account is the growth expected from Tesla. Revenues are expected to double in 2014. This would justify the premium that Tesla trades at.

The author states that “The idea that TSLA deserves to trade at a premium multiple of 20+ fold in Price/Sales and Price/Book is ridiculous.” However, Tesla is also expected to grow revenue at 20+ fold compared to the other automakers.

Conclusion

There is no viable upcoming electric competition for Tesla and there is unlikely to be in the time-frame of the Gen III launch. This will give Tesla a huge first mover advantage.

Disclosure: Long TSLA, NSANY

More on Tesla: Customer Deposits, Greenness, Economics of the Gen III etc.

In the comments of many of my articles and others at Seeking Alpha, especially after last quarter’s results where Tesla delivered fewer cars in America, people question the continued growth of demand for Tesla’s cars. However most people ignore one of the best predictors of customer demand – Tesla’s customer deposits. Tesla reports these every quarter in their financials.

Read Full Article at Seeking Alpha – Looking At Tesla’s Most Overlooked Number: Customer Deposits

Several articles on Seeking Alpha have so far cast doubts on the greenness of electrics, especially long range vehicles like the Tesla (TSLA) Model S.
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So far, the cost discussions always involve the cost of purchasing vehicles. However, luxury vehicles are mostly leased with the lease penetration of high end luxury cars, like the BMW 7, being over 85%. Tesla doesn’t offer a traditional lease program, but by the time the Gen III vehicle from Tesla (a BMW 3 series size vehicle) arrives, chances are good that the company will offer a traditional lease program.

Read Full Article at Seeking Alpha – The American Power Grid And The Economics And Greenness Of Tesla’s Luxury Electric Vehicles

The Tale Of Three Loss Making Hot Stocks – Pandora Vs Twitter Vs Tesla

Pandora (P) is in the business of online radio. Twitter (TWTR) is in the business of communication via microblogging. Tesla (TSLA) makes cars. That’s where the dissimilarity ends and the similarity starts. All of them are hot tech stocks (yes I called Tesla a tech stock). None of them are profitable yet (except Tesla on a non-GAAP basis). Tesla went IPO in 2010, Pandora went IPO in 2011 and twitter went ipo a few weeks ago. From 2010 – 2012, all three showed similar revenue growth. All of the estimates for 2013 are based on reports for the first few quarters and estimates for the remaining quarters. For Twitter, I estimated revenues and losses by just doubling the first two quarters. For Pandora I doubled revenues and for losses, I used data from a previous article. For Tesla I used 4/3 * first three quarters.

However, as far as losses go the picture is not so similar:

We can already begin to see how Twitter doesn’t particularly paint a good picture. The other two seem to be reducing losses significantly.

From my previous article on Pandora, it is obvious that the path to profitability for Pandora is only becoming smoother in 2013.

2013 for Tesla, was a great year where they finally started delivering cars in volume (on track for 21,500 Model S delivered this year). I have covered Tesla extensively before.

The picture for Twitter is unknown. It has grown revenues significantly in 2013 but profitability seems out of reach. Pandora revenues come from both advertising and subscriptions. Twitter, on the other hand, solely relies on advertising. Also, Pandora advertising is fairly unavoidable – ads are forced listen. Twitter, in comparison, by design is difficult to advertise in, especially on mobile devices where a majority of their customers are. In fact twitter started out by using SMS, where it is inherently difficult to advertise in the limited space.

Looking at the numbers (on 11/20):

Twitter Pandora Tesla
P/S 43.8 9.5 8.71
Market Cap 22.3B 5B 14.9B

It is fairly obvious that for companies with sort of comparable revenues and revenue growth, Twitter is wildly overpriced compared to both Pandora and Tesla. If anything, Twitter should be worth much less than the other two.

As of now, Tesla stock is depressed from highs thanks to adisappointing quarterly report, media attention to Tesla cars on fire and an accident at its factory. Pandora is hitting new highs thanks to analyst upgrades. Twitter stock direction is currently flat to slightly down from its IPO but I’m predicting a slow downward movement.

So if you were thinking of adding a hot tech company to your portfolio and were considering Twitter, thanks to the hype – maybe you should consider Pandora or Tesla instead.

Disclosure: Long TSLA

Why I’m Invested in Tesla and more articles on Seeking Alpha

I first got convinced to buy Apple stock when everyone around me was using a very expensive iPhone that had no 3G, no Apps, nothing. Similarly we (Parchayi and me) are invested in Tesla because no car in my life has caused so much excitement in buyers.

Here are some quotes from Tesla owners:

” It no longer makes sense to drive the Ferrari – the Tesla provides such a greater depth of satisfaction.”
” the P85 feels a LOT quicker than the Ferrari in the real world.”
“Our 911 C4 sits in the garage and nobody wants to drive it anymore. “
“You might add a classic Corvette Stingray to the list. Now it just seems – Old Fashioned.”
“I sold my BMW M6 to[o] noisy to[o] primitive”
“Add another Porsche (1 yr old 991 CS Cab) to the list. Loved the car when i got it, but after the S, seriously wondering whether it should take up space in the garage. “
“The Maranello sits in the garage with not even enough love to keep the battery charged.”
“I can’t remember what my Mercedes felt like and don’t care.”
“Add my BMW 550i and my TDI SUV to the list”
“But now my Pagoda seems less related to a Gullwing or an SLS or a Ferrari than they all seem related to Model Ts.”
“Can’t stand my CLK500 any more. “
“I refuse to drive an ICE now”
“Add Ford Mustang a Shelby KR and a whole bevy of other high end Mustangs.”
“I literally just sold my 2005 911S yesterday.”
” I can also say goodbye to my Audi TTRS.”
“after the test drive I feel my Jaguar XKR obsolete”
“I still love Ferrari but not near as much as the Tesla.”
“I have a BMW 765i …. Used to love the feel of the V12, but now it’s nothing compared to the Tesla.”
” My BMW M6 is gathering dust in the garage.”
“I never hand wash my car until i got the Model S.”
“You can add an Aston Martin V8 Vantage to the list of ICE’s that have become second choice”

Now if that doesn’t convince one to buy into a car company, well here are some numbers for you in my SeekingAlpha Articles:

A Less Optimistic Look At Tesla Numbers (still makes for a great investment)

Tesla Sales: What you need to know before earnings (this is my optimistic look at Tesla)

 

State Of Innovation In The Auto Industry And The Allure Of Tesla

I received intense follow-up on the two articles I wrote about Tesla (TSLA), the first one countering the bear arguments of the stock and the second one attempting to value the company. Most of the intense arguments hinged on the assumption that the auto industry will not stand still as Tesla marches forward and by the time the Tesla Gen III launches, it will have intense competition from the rest of the auto industry. While that is possible and something that I would really appreciate at a personal level, the state of innovation in the auto industry indicates otherwise.

Read the full article at Seeking Alpha – State Of Innovation In The Auto Industry And The Allure Of Tesla