This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Looking At Tesla From Outside The Possible Bubble

Chris Lau, Kapitall: Investors might be tempted to dismiss companies that break out on the upside as being in a bubble. In the last three months , Tesla Motors (TSLA) rose by more than 50% and is up 352% in 2013. With such massive returns, investors should ask if Tesla is in a bubble, or if things are different this time.

[Read more from Kapitall: Hedge Funds Booking 3 Rallying Tourism Stocks as International Travel Soars]

Beyond 50% return

Click on the image below to see prices over time. Sourced from Zacks Investment Research. 

<p>Your browser does not support iframes.</p>

Tesla received a $230 target price from Northland Capital in mid July. At the time, shares were $120, well above a $40 stock price in April 2013. The firm then suggested the stock was worth $300 if the factory was running at its maximum capacity.

Positive momentum is supporting the upward trajectory for Tesla stock. Investors are excited that Tesla could improve the charging times at supercharging stations. If Tesla can cut times from 20 minutes down to as low as 5 minutes, then the current share price may be justified. Quarterly earnings that beat estimates on earnings and sales are another reason shares are up. In the last quarter, Tesla earned $0.20 per share (non-GAAP) on revenue of $405 million. Analysts expected Tesla to lose money (GAAP) in the quarter. Profits are low but not negligible at this time, because Tesla is investing its profits in its infrastructure and manufacturing capacity.

Strong gross margins

Tesla aims to have a 25% gross margin (including ZEV credits). In the last quarter, gross margins were 12 points away from that target. Manufacturing capacity is also improving. Tesla said in its conference call that it had the manufacturing capability to make 40,000 units if it chose to do so. The company does not want to over-produce the units, and is monitoring demand. The capacity is also limited by Tesla’s suppliers.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.01 0.00%
FB $99.51 -0.24%
GOOG $677.65 -0.75%
TSLA $147.00 -0.67%
YHOO $26.82 -0.85%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs