Tesla shares zoom higher after upgrade
They started the year priced at about $33. Now they're topping $178 as Deutsche Bank gushes.
A solid upgrade from Deutsche Bank late Wednesday sent shares of the electric car maker up more than 7% Thursday morning to above $178. Analyst Dan Galves thinks the company could outperform margin expectations in the third quarter, and adds that demand continues to grow in the U.S. and in Europe.
Galves maintained his "buy" rating on the stock but now thinks that the share price will head to $200. You can see more of his report here.
The Deutsche Bank report follows a fairly amusing take from Morgan Stanley, which notes that "the inclination of many rational investors is to do nothing" with Tesla shares, even though shares are reaching new highs all the time. "We sort of agree."
You'd think that investors would be somewhat muted after General Motors (GM) said this week that it's developing an electric car that could rival Tesla's products. GM says it's working on a car that can go 200 miles on a single charge and would cost around $30,000, according to The Wall Street Journal. But the company wouldn't say when the car would be available, and admitted that the high cost of batteries is holding back its release.
That wasn't enough of a threat to bother investors, and Tesla CEO Elon Musk says he's glad to hear GM's news. "Am happy to hear that GM plans to develop an affordable 200-mile range electric car," Musk wrote on Twitter. "Right target. Hope others do same."
Musk has every right to exude such confidence. After all, Consumer Reports earlier this year called Tesla's Model S the best car it has ever tested, awarding it a 99 out of a possible 100.
The Model S also triumphed when it basically broke the testing equipment at an independent commercial facility used by the National Highway Traffic Safety Administration. Testers were trying to run the standard roof crush analysis, only to find that the machine failed after the Model S withstood more than 4 G's of pressure. That's the same as stacking four of the vehicles on top of the car without the roof breaking, Wired reports.
So Tesla's been riding a highway of unbelievably good news this year. How long can this continue? According to its stock price, investors expect all cylinders to be firing for quite some time.
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Remember when a company’s stock value was a modest reflection of its revenue, people and products, when decades of revenue growth, product utility and value were most important in assessing a stock’s price. Now it seems that most companies are merely shells for stock offerings, stock factories, whose greatest accomplishment is the value and quantity of their stock.
What if you took away all the stock, and a company was nothing more than what it makes and earns, what would our country look like. Where might we invest all of that new found revenue?
I'm not a business person so I can't comment on how good of investment Tesla motors is. I am simply a lowly engineer of no particular distinction. But before we all jump on the electric car band wagon maybe we should give some thought to some simple low level physics. Let us compare 3 energy sources.
1. Gasoline = 10 calories per gram
2. Chocolate Chip Cookies (my personal favorite) = 5 calories per gram
3. Computer Batteries (as used in the Tesla) = .1 calorie per gram
Basically what the above tells us is gasoline has 100 times the energy density of the best batteries you can buy. This dictates that unless battery technology changes a lot electric cars are always going to occupy a small specialty market. Most consumers will simply be unwilling or unable to accommodate the inherent disadvantages of an electric car.
Tesla is very overvalued and here is why. Right now they sell a premium electric vehicle. So right now the brand is selling because of its status. Like when someone buys a Lamborghini they do so to show off that hey I have a $400,000 vehicle.
Tesla isnt quite at those prices which for them is good. It allows them to appeal to a larger group of people. However, this brand image will never allow for an affordable mass market vehicle. Do you really think Lamborghini would be the same brand if they had a $60,000 vehicle? HECK NO! Their top sales would decline because it would lose its elite brand status. Back to Tesla there are only soo many people that will buy these battery powered vehicles. Once all those customers have one what are you left with? Either going up scale which will be difficult and produce ever smaller sales volumes, or going affordable and losing the upper scale more profitable sales.
For a company barely making money with very low sales numbers the company is worth way more than it should be. Any investor willing to buy Tesla over $30 a share deserves to lose their shirt and they will in due time. Sadly the rich that short the stock will be the ones to just get richer and the poor traders getting in late will be the ones to lose it all.
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