About a year ago, Tesla Motors (NASDAQ: TSLA ) became the first U.S. auto
company to go public since Ford's (NYSE: F ) offering back in the 1950s. The
company's next-generation electric vehicles definitely excited investors.
However, after reaching about $35 per share, the stock's performance has been
mostly lackluster. Currently, it's at $22. Yet on its most recent conference
call, the company's CEO, Elon Musk, declared Tesla had its "best quarter"
ever. Revenues doubled to $58.2 million, and the company raised its full-year
top-line forecast to $190 million. So is it time to take a ride on Tesla's
stock? Let's take a look at the pros and cons: Pros Innovation. Tesla has a
tremendous team that includes topnotch engineers from companies like Google
(NASDAQ: GOOG ) and Apple (NASDAQ: AAPL ). Among their core technologies, Tesla
vehicles feature a highly sophisticated powertrain that delivers high
performance as well as zero tailpipe emissions. The company's standardized
approach to production means Tesla can develop new models quicker, which
certainly would give it a competitive edge in the auto industry. The company has
35 issued patents and 207 pending. Distribution. Tesla sells its cars through
its own locations in the U.S., Europe and Japan. Kind of like an Apple store,
Tesla's store environment is sleek. In fact, you can use a computer to design
your own car. By controlling its distribution, Tesla can better manage pricing
and get valuable feedback from customers. Model S. Expected to hit the market in
mid-2012, this is a four-door, five-passenger sedan. It has premium styling and
gets as much as 300 miles per charge (with the most advanced battery option).
Oh, and it inclues a 17-inch touchscreen with in-car 3G connectivity. While the
Model S is pricey $49,900, including a $7,500 federal tax credit customer
demand for the car already is encouraging. So far, there already are 5,600
reservations, each of which required a $5,000 deposit. Cons Losses. Since its
inception, Tesla has yet to make a profit (in the latest quarter, the loss was
$58.9 million). Unfortunately, losses are likely to continue for the next couple
years. Market. Tesla faces significant competition in a product category still
considered experimental. For example, GM (NYSE: GM ) is selling its Volt and
Nissan has the LEAF, but sales of those vehicles have been fairly disappointing
so far. Tough conditions. While Tesla's first car the Roadster was stunning,
it still could not attract much interest from customers (one big problem was the
$100,000-plus price tag). Actually, the company recently ended Roadster
production, which means the success of the Model S will be absolutely critical
for shareholders. Verdict Tesla's cutting-edge technology has attracted top
auto companies. For example, Tesla landed a $100 million contract from Toyota
(NYSE: TM ) to make batteries for Toyota's RAV4 EV. And there might be another
big contract in the works. But again, Tesla is betting big on the Model S. It is
a great vehicle, but it is far from clear whether it will gain enough customer
acceptance. So for investors, I think the cons outweigh the pros for Tesla's
stock. Tom Taulli is the author of various books, including "All About
Commodities." He does not own a position in any of the stocks named here.
No comments:
Post a Comment