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

Why Tesla Makes Good Sense

RENO, Nev. ( TheStreet) -- Forget everything you know about Tesla (TSLA - Get Report).

Forget about the stratospheric valuation. Forget about the 30% short interest. Forget, for a moment, that it's a car company.

None of these things matter.

We see this every once in a while in the markets. Something really, truly new comes along. For lack of a better phrase: something revolutionary.

We saw that with Amazon (AMZN) back in 2003. The industry laughed. No way could a retailer support such a valuation and a $50 target. Retail was a lousy, low-margin business.

We saw this with Google (GOOG) back in 2004. It IPO'd at $85 and at the end of the year was trading at $100. The financial industry laughed. No way, cried some on Wall Street, was Google worth $100 a share. Search was destined to be a niche business not a colossus. 

With Tesla, we're seeing many of the same themes play out. The financial industry is either laughing, or giving the car maker the cold shoulder. How could this company be worth $25 billion? Cars are a cutthroat, low-margin business, right?

Google and Tesla have this much in common:

They each blew up conventional wisdom with little regard for short-term profits, they gave consumers what they really wanted, and none of the traditional rules of investment or analysis applied.

You've never really been able to plug Amazon, Google or Tesla into a Graham & Dodd spreadsheet or try to discount their cash flows. These companies aren't as much businesses as they are engines for hyper-growth and innovation that can completely change their industries.

Over the years, skeptics tried to have their way, but the road that revolutionary companies travel is littered with the bodies of traders who tried to bet against them.

Remember the wise words of TheStreet's own Doug Kass: "Never short a concept or a valuation. Only short business models that are broken."

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
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
TSLA $206.79 0.00%
AAPL $124.75 0.00%
FB $80.78 0.00%
GOOG $524.05 0.00%
YHOO $44.45 0.00%


DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs