Buy a Tesla, steer clear of the stock
The prospect of never again having to pay for gas is exhilarating, but the stock has to be considered a lemon until the company manages to turn an operating profit.
By Robert Weinstein, TheStreet
There are few days in life that are more thrilling and terrifying than the day you take your driver's license test.
It was almost 30 years ago, and I still remember returning from the official test drive thinking I didn't pass. As soon as the examiner advised me to "slow down," I thought the exam was all but over.
Newly minted drivers aren't the only ones who get excited. Investors allow emotions to take the steering wheel at times, too.
There's an American-made luxury SUV that I started test-driving a few weeks ago to replace my Escalade. The luxury SUV I'm considering is built in Tuscaloosa, Ala. You may not know it, but Mercedes-Benz has a factory in the South that produces some of the finest vehicles in the world.
The ML63, packed with 550 horsepower and 560 lb-ft of torque, goes from 0 to 60 in 4.9 seconds, faster than Tesla's (TSLA) standard Model S. The ML63 has all-wheel drive, so when the snow hits the ground, the ML63 also beats the Model S Performance.
But Tesla's Model S Performance has advantages over the ML63. Aside from a neck-snapping 4.2 second 0 to 60 time, the real excitement for me is thinking about never having to pay for gas again. According to Tesla's website, a supercharger station will be built near my home in Wisconsin soon. Tesla allows Model S performance owners to charge their vehicles for free.
I can't say receiving free battery charges invokes the same magnitude of enthusiasm passing my original driving test created, but the thought is attractive. Unequivocally more attractive than buying Tesla shares at the current valuation.
At $132 per share, there's not much to like. The forward earnings multiple is over 100 (P/Es over 20 have historically underperformed the overall market); the Quick Ratio is 0.54 (over 1 is considered safe); and last quarter's "profit" was a result of government paid corporate welfare.
Tesla doesn't expect to make an operating profit next quarter -- and the list continues for longer than the range of its high-capacity battery.
In other words, buy the car but leave the lemon of a stock for someone else. Otherwise, you may find your investment on the side of the road needing repairs.
More from TheStreet.com
By this same time next year, the author of this SHORT-SIGHTED article will be eating his words. Bank on it.
A Tesla is a beautiful car, about $60k.
I would buy one, and it would be my primary car if I did. The problem is range.
If you are in town only, it's great because it's range is about 260 miles.
However, if this going to be your primary (and only) car, then if your going on vacation and drive 400-800 miles in areas where there are no Tesla charges, you are up a creek.
That's my only problem with the car. I know more charges are being built in various areas, but not where I go( I put 700 miles in Yosemite Park alone).
After paying an extra $45,000 for the privilege for the next decade.
Not only paying the extra 45 grand but having to pay the replacement battery after 6 to 8 years and figuring out where all those batteries will go in our Nations landfill.
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