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Making sense of Tesla: An investor's guide to a unique company

Making sense of Tesla: An investor's guide to a unique company (Part 1 of 7)

An incredible stock: What’s the big deal with Tesla?

Investing in Tesla

Tesla, to most readers, is a beautiful, fast car. To most investors, it’s been an incredible stock. Let’s take a deeper look at this company that’s gained so much attention.

TSLA foundation for continued successEnlarge Graph

 

Claims

The chart above is from an investor presentation within the last 12 months. You can see the main product in the photo above, a sports car. The buzz around the brand is that it’s technologically advanced. Granted, consumer messages from other automobile manufacturers present this, but somehow with Tesla, it seems different. The company is in California and was founded by Elon Musk, a fellow who’s made a fortune in technology and has a knack for high-profile, technologically challenging ventures and self-promotion.

The chart from the company claims it’s the leader in range, pack cost, and charge rate. Range and charge rates are certainly premium qualities. With this market segment, do people care about pack cost? Tesla says it’s a proven brand, but can it prove this in the context of the small niche it’s selling in?

Looking further to the chart, Tesla has some automotive and technology leaders somehow tying in with Tesla in sales, suppliers, and investors. Tesla presents itself as a growth platform in manufacturing, store service, and supercharging. Tesla also wants you to see it’s managed by a “world class management team.”

Facts

These are words and concepts, but Tesla had $746 million in cash as of June 2013. As of March 31, 2014, Tesla had $2.6 billion in cash and short-term equivalents and a market capitalization of $25.6 billion. This compares to GM, which makes around 9 million cars a year globally. Ford (F) has billions of free cash flow to invest in new models. Toyota (TM) offers investors a company that developed over the past 30 years from an economy product to a full-ranged offering.

Tesla is making a big splash in this industry.  Let’s take a closer look at the key aspects of Tesla. Ultimately, we’ll see if this company’s story makes sense and if the valuation holds water.

The Realist Discussions

  • Alan Dean Foster

    So GM has “a long history of generating value for shareholders”. Tell that to my mother who died holding thousands of shares of worthless stock after GM declared bankruptcy.

    Al Capone generated value for his “shareholders”.

  • QKodiak

    The Tesla Model S’s 0-60mph time is officially 4.2 sec., with some owners and reviewers achieving a time of 3.9 sec. to 60 mph.