Idea Of The Week Is The Tesla Electric Car On A Road Called …

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Tesla Motors Electric Cars

Idea Of The Week: Is The Tesla Car On A Road Called ‘Overvalued’?

phones … electric cars: may be some historic parallels. We at electric car maker Tesla to try to map out the

Imagine that you’re at your desk in 1994. reading a report about the phone industry – the new technology of the The article correctly forecasts all the benefits to come – the smart revolution, continued miniaturization, via inbuilt GPS, mobile online flight check in, passes, etc.

If the article was prescient and identified all the industry’s and turns of the next 20 years, try and what stock recommendations have been made. – yes, an early leader. Maybe – the first GSM handset, the was released two years earlier.

Samsung? Maybe, the SH770 was in late 1994 and marked the time the company’s product was on par with Motorola. HTC? No, phone and PDAs were 2002. Blackberry/RIM?

No, the first shipped in 2006. Apple? No, launched in 2007.


Now consider the future of the electric car and look at Motors Inc. (TSLA.O). Try to the competitors who will enter space, the new technologies, the responses the existing players who have flow to burn on research – and at Tesla’s valuation, a forward P/E of 36 times book value.

Anticipating risks

Every new is somewhere between evolutionary and and every time human gets excited about a new we eventually discount all of the risks – flawless execution, a continued of competitors and that this remain the only stock in If we return to the mobile phone no one could correctly anticipate the industry dynamics. Yet Tesla’s valuation implies 44.7% EPS every year for the next 10.

hard to think I’m the only one such skepticism over punchy multiples. Tesla happens to be within bottom 2% for the Short Interest model, the hedge funds are already for a fall. Unlike many factors, the crowded trade tends to work.

When professional traders are there tends to be a subsequent – in other words this does deliver alpha.

to Cisco

For those of you who are short traders – just riding momentum – all these valuation and longer term considerations are – but for those thinking you can just buy and in a new technology space – I’d urge you to

Tesla Motors Electric Cars

Consider the chart below Thomson Reuters Eikon. is Tesla over roughly the four years alongside (once, the new new thing). I’ve included an eight-year view of from 1996 to 2004 to you a sense for what happens a bubble bursts.

Remember, the hype was correct – did continue to grow and people buying routers – but not at the silly the market had been implying the late 90s.

Disconnected growth

I suspect Tesla be hugely successful. However, the is what level of success is assumed to be a certainty at the current level, and considering the last 10 how comfortable are you with ‘certain’

The CSCO chart should as a salutory reminder that a fundamentals can be solid, with growth, but that won’t the stock price if the valuation has disconnected from achievable term growth.

I have no idea what happen in the next five Looking at the current valuation, a seems to have an asymmetric profile, a modest chance the stock will outperform expectations and a significant chance there’ll be challenges. These may be execution, competitors, margins, supplies – who knows. But since of those challenges are even considered in the current valuation – I’d be cautious. For the trader keep an eye on the Analyst Revisions Model.

If upgrades should falter, out below.

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Tesla Motors Electric Cars
Tesla Motors Electric Cars
Tesla Motors Electric Cars
Tesla Motors Electric Cars
Tesla Motors Electric Cars

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