Tesla could be the greatest stock story in years

Here's why you'd be crazy not to buy shares of the electric-vehicle manufacturer.

By StreetAuthority Apr 28, 2014 8:18AM
Tesla Model S sedans outside of the Tesla Factory on August 16, 2013 in Fremont, Calif. (© Justin Sullivan/Getty Images)By Jim Woods

Some stocks are considered good values, with attractive fundamental metrics such as a low price-to-earnings (P/E) ratio, a low price-to-book ratio, and so on. Some stocks are great technical plays, forming bullish double-bottom or cup-and-handle chart patterns.

Then there are some companies whose stocks that power higher because they have a genius CEO who brought a product to market at just the right time.

Tesla Motors (TSLA) is one of the latter -- and the way I see it, you'd be crazy not to own the stock at current levels.

The following price metrics should give you a sense of the power of this stunning electric-car maker's draw:

-- Up 12 percent in three months (through April 23 close)
-- Up 35 percent year to date
-- Up just shy of 300 percent in one year
-- Up 756 percent since its June 29, 2010 IPO

The numbers don't lie. Investors have embraced Tesla CEO Elon Musk, the electric vehicle growth story and the enormous game-changing potential that this company brings to the automotive industry.

Tesla took another step forward this week, as it began selling its signature Model S sedans in the biggest auto market in the world, China. It just delivered its first eight vehicles to Chinese customers, with Musk on hand to celebrate the company's milestone.

During a media event in Beijing, Musk said he plans to invest several hundred million dollars to build a nationwide network of electric charging stations to service what he thinks will be a burgeoning market in China for Tesla. Yet Musk didn't stop there -- he also said Tesla intends to manufacture vehicles in China.

China-based production of Tesla vehicles would allow the company to sell its Model S sedans for a lot less than the current $121,000 price tag. While U.S. consumers shell out $81,000 for the vehicle, China imposes a 25 percent import tariff in addition to shipping costs. And, of course, the production in China would allow Tesla to deliver vehicles to Chinese buyers more quickly.

The China news sent TSLA spiking more than 6 percent, but I think this is just one of many big trading days on the horizon for this stock.

Despite the gains so far in 2014, TSLA is actually off about 18 percent from its all-time high, made in late February. The move has taken shares down below their 50-day moving average.
Yet, it is partially because a little of the fat has been trimmed off the stock that makes buying TSLA here even more of a no-brainer. Think of it this way: You are getting perhaps the greatest stock story in years -- and what I suspect will be one of the greatest stock stories of the next five years -- at a big discount.

Action to take:

-- Buy TSLA at the market price
-- Set stop-loss 10 percent below entry price
-- Set initial price target at $279 for a potential 28 percent gain in four months

Jim Woods does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

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12Comments
Apr 28, 2014 6:04PM
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Yes, there is perhaps a "greatest stock story" in many years concerning Tesla, but it's not what you think nor what the article claims.  Instead, it is about the incredible extent to which people have been taken in by claims that electric vehicles are "energy efficient", "zero polluting" and "good for the environment".

About 68% of the electrical energy generated in the US comes from fossil fuels, and about 37% of the total is generated by coal-fired power plants, one of the worst-polluting sources.  Modern automobiles burn gasoline as cleanly as, if not not more so, than coal-fired power plants burn coal.  About 19% of the total US electrical energy generation comes from nuclear power plants, and most people are starting to recognize the long term environment problems with these.  On top of this, on average about 7% of all electric energy generated is lost between the generating source and the point of end-use (e.g., your home or a Tesla re-charging station).

Therefore, the end-to-end combined energy conversion efficiency of an electric-powered automobile is comparable, and may even be slightly less, than that of a modern gasoline powered internal combustion engine.  So, the electricity you get out of your home's electrical system or at a electric vehicle charging station in not at all environmentally clean or even that "energy efficient" when applied to powering an automobile.  On a passenger-mile-driven basis, electric vehicles are really no better than gasoline-powered vehicles in terms of their environmental "footprint".
Apr 28, 2014 1:57PM
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Tesla will manufacture in China? That's not good news. China will steal the technology and start their own company to produce the same product. And what's up with China's 25% import tariff? 
Apr 28, 2014 1:45PM
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Telsa is a Joke -  Buy Now - Lose Later !
Apr 28, 2014 7:39PM
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There is nothing unique about tesla technology. It is all off the shelf technology available to anyone with money.
Apr 28, 2014 1:47PM
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it all hinges on the battery manufacturing plant they have yet to build.  if they can do it, tesla will make it, if they don't, they'll flop, or just be luxury car maker that maybe breaks even.
Apr 29, 2014 1:46AM
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My concern with Tesla is that I don't see any durable competitive advantage.  Their batteries are simply lithium batteries generating 80% of theoretical efficiency as all others' lithium batteries are.  What patents do they have on motors, etc. that others can't duplicate or work around?  And if they build up a nationwide recharging system, they're making it even easier for the big automakers to jump in when things become too profitable to pass up.

Amazon has a system that would be extremely costly to duplicate.  Cracker Barrel Old Country Store has locations that are now on prime, expensive land.  They would be difficult to reproduce.  But what does Tesla have?  Technology that can be studied and easily copied.

The last time I saw people oohing and ahing like this over some tech story, it was laser eye correction in the 1990's.  A company called VISX had all the big patents and even Jim Jubak said that if he had to leave for a 10-year trip to Mars and had to put all his money in one stock, it would be VISX.  But VISX had no durable competitive advantages.  It's patents were tied more to programming than to hardware.  It had no patent on lasers.  It had no patent on lenses.  It had no patent on computers.  And soon it had virtually worthless stock.

Apr 29, 2014 12:47AM
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Tesla will be out of business in ten year if they can't improve batteries and mileage. They just won't sell enough cars. The journalist is not a "diaper dandy". Think!
Apr 28, 2014 9:30AM
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"Yet, it is partially because a little of the fat has been trimmed off the stock that makes buying TSLA here even more of a no-brainer. Think of it this way: You are getting perhaps the greatest stock story in years -- and what I suspect will be one of the greatest stock stories of the next five years -- at a big discount."

Does anyone need any more proof that the Talking Heads for Wall Street have Zero integrity. I love the Tesla Story and root for the CEO to succeed beyond even his wildest Dreams. I believe this company could be a Global Game Changer. However nobody with a honest bone in their body will sale investors this type of Pie in the Sky Talk.
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