At a valuation that's overwhelming the old-guard like Ford (F - Get Report) and General Motors (GM - Get Report) , Tesla's rise comes at a time when the broader automobile segment is contending with some soft numbers.
The company's stock is up 42% year to date after a satisfying update on deliveries.
But risks and uncertainties remain. Analysts continue to stay cautious on Tesla given its mercurial movement patterns. Real profits and genuine capital creation can only stem that skepticism.
Remember Tesla hasn't brought in a single dollar of profits over the last 10 years, despite its nearly $50 billion valuation.
The marked jump in annual revenue, rising to $7 billion in 2016, and the massive opportunity to sell high-end electric vehicles is that magic mantra luring investors in droves.
On the other end of the spectrum are Ford and GM, who are genuine growth drivers, selling millions of conventional vehicles. Global automobile leaders like Toyota (TM - Get Report) , Volkswagen (VLKAY) , Daimler (DDAIF) and Honda (HMC - Get Report) have similar business models.
Tesla's also been vastly unreliable. CEO Elon Musk is almost a force of nature, brandishing incredible projections, often unachievable , and at times radical in their tone and scope.
Much like Apple and other brands that carry a pull-effect on customers, Tesla has an automatic consumer-connect. Since its success as a niche player, it's been building capacity to go mainstream.
The Model 3 sedan is expected to reach out to the widest cross-section of users.
Detroit automakers missed U.S. sales estimates for March. Ford, General Motors, and Fiat Chrysler (FCAU - Get Report) all deployed incentives to bump sales. For Tesla, its self-proclaimed target of 500,000 units produced in 2018 is a massive enthusiasm builder. Doubts about that number have now abated and it appears first-quarter deliveries for Model S and Model X are right on track.
Indeed, it's not easy to initiate a "buy" call for Tesla. However, Tesla's electric vehicles and its stock price ascent, up 760% in five years, have reflected the company's ability to find faith among investors.
Some analysts are comparing Tesla to e-commerce giant Amazon, which since expanding sales rapidly is now an invincible profit generator.
Tesla built only 84,000 cars last year. If Musk can push that number forward, investors will rally behind the stock. And once profits begin to pour in with genuine car sales, the landscape should change further.
The 19 analysts offering 12-month price forecasts for Tesla have a high target of $375, 25% ahead of its current stock value.
In the future, when self-driven automobiles operate on clean energy, Tesla will be a giant beneficiary of that revolution. For now, all that's missing are the profits.
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