Tesla Motors Stock Investing
Is This the End for Electric Cars?
Back in March, I was speaking at a conference about the future of personal transportation.
I discussed how a new generation called the Millennials or Generation Y would ultimately force change in the marketplace and present a real challenge to car makers.
You see, there have been a number of studies that have suggested this particular generation — which represents the kinds of numbers that allowed the baby boomers to dictate a lot of our consumer decisions today — is less interested in car ownership than previous generations...
They prefer public transportation, biking, walking, and car-sharing services like Zipcar (NASDAQ: ZIP).
And for those folks who now fall between the ages of 19-31 who are receptive to car ownership, they account for about 25% of the U.S. automobile market. In ten years that's expected to rise to 40%.
So, what will they drive?
According to a recent Deloitte study, these folks tend to mock gas guzzlers and embrace hybrid, plug-in hybrid, and electric vehicles (EVs).
If you're a regular reader of these pages, you know I've long been a supporter of electric vehicles. I firmly believe that by the end of this decade, EVs will capture between 1% and 1.5% of the total US vehicle market.
On the surface, this may not seem like much. But it's actually a pretty aggressive target — and a pretty big deal.
As a result, we've profited from the early development of this market from every angle; most of this came from riding the early wave of lithium and high-performance battery plays a few years back. Today it's a bit more difficult. And while I remain a strong supporter of electric vehicle development, I'm extremely cautious as an investor.
In fact, the only EV-related stock I've played this year was Tesla (NASDAQ: TSLA), and I jumped out back in March after the stock started looking a bit top-heavy after crossing the $36 mark.
Since then, I've watched the stock tumble and rise a few times. I've seen a number of trading opportunities (although I did not play the stock this way), and I've read some pretty long and detailed analyses of the company by both credible analysts and overly-optimistic bloggers posing as analysts, as well as by the typical anti-EV narcissists who get off at watching a game-changing industry struggle with the early bumps and bruises that come with any disruptive technology.
The latter, of course, typically provide little more than noise. But they came out in full force this week after Tesla's recent announcement that it was cutting its 2012 revenue forecast...
Due to a slower-than-expected rollout of the Model S sedan, the company has adjusted its full-year revenue to come in at around $400 million to $440 million. This is down from Tesla's prior outlook of between $560 million and $600 million.
|Tesla Model S|
This is a pretty big discrepancy. And on the day of that announcement, the stock fell in excess of 10%
Needless to say, the knuckle-dragging naysayers were busy little bees over the past few days, finding as many ways as they could to not only trash Tesla, but the EV market as a whole.
We heard the same broken record rhetoric about how no one wants these cars, how sales are disappointing, and how the technology “isn't there yet”...
It's all nonsense.
Don't get me wrong; I'm not rushing out to buy shares of Tesla. And quite frankly, I think some analysts' price targets on this one are a bit off base. I was very suspicious last week after Morgan Stanley put a $50 price target on this thing.
Of course, I don't have access to the same intelligence and data as the suits at Morgan Stanley, so perhaps I'm missing something...
But I don't believe Tesla will even have the capacity to impress enough to push the stock to those levels until we get some better clarity on Q4.
It is only then when we will have a better read on Model S volumes. If volumes do in fact increase, then we should see the cost improvements necessary to improve gross margins.
I remain bullish on Tesla as a small but growing force in the auto industry. And I definitely wouldn't bet on Tesla to crash and burn, as some not-so-honorable analysts have suggested.
However, I'd be hesitant about believing overzealous price targets on this one. Because the truth is, until we see how Q4 shakes out, there's just not enough data to back a price target exceeding $35.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor''s page.