Top picks 2012: Tesla Motors
Silicon Valley-based maker of electric cars powers up for the mass market.
While Toyota has blanketed the U.S. with milquetoast hybrid Priuses, and the Chevy Volt and Nissan Leaf are uninspiring "appliances," Tesla Motors (TSLA) has done something different. It has built electric cars that are thrilling to drive.
Musk looms large in the story because he used much of his own money to bankroll the project, supplemented in time by money from private investors -- as well as $465 million from the U.S. Department of Energy.
Last year's IPO was just the latest chapter of financing, and possibly the last. From the beginning, Tesla's goal has been to create and sell affordable mass-market vehicles that would reduce oil consumption. But the company hasn't yet targeted the mass market.
Its first step was to develop two-seat electric sports cars costing $109,000. It has sold more than 2,000 of these Roadsters (in 30 countries) and will stop after 2,500. The revenues from that effort are funding work on the company's next car, the Model S, a sedan that will sell for $57,400. Tesla has already taken reservations for more than 6,000, and will begin deliveries in mid-2012. It also expects to offer an SUV, the Model X, based on the same platform, with deliveries in 2014.
This strategy mimics the way successful Silicon Valley companies launch products; hit the rich early adopters first, then drive costs down to serve the mass market. Furthermore, Tesla has boosted its cash flow by inking major deals with Daimler and Toyota for its proprietary powertrain systems . . . which tells me these components are the best.
Not only does Tesla have revolutionary technology, unlike most car companies it also has little debt and a young, bright work force, and no retirees with costly pensions. The company's revenues were $15 million in 2008, $112 million in 2009 and $117 million in 2010. Revenues could hit $550 million in 2012, as the Model S hits the streets.
And Musk foresees a profit in 2013. TSLA went public in June 2010 at $17, peaked at $36 in November 2010. It has retreated somewhat since then, restrained in part by the weak broad market and by reports of fires in the batteries of (intentionally) crashed Chevy Volts.
But that's short-term, and I see a buying opportunity. Long-term, I rate Tesla as one of the stars of the present-day automotive revolution and a high-potential long-term investment.
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Down for the short term, BHP Billiton, China Mobile, and McDonald's should have profitable futures.
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