There seems to be no end to the good fortunes at Tesla Motors (TSLA).
The latest Tesla earnings report showed continued growth a torrid pace, and in turn, TSLA stock jumped forward by roughly 10% in Thursday trading.
That puts the 52-week gains for TSLA at roughly 440%, and has most people wondering just how high Tesla can go.
Tesla Earnings at a Glance
Fourth-quarter revenues came to $761.3 million, up from $306.3 million in the same period a year ago, and easily topping Street estimates of $712.7 million. However, Model S deliveries of 6,892 did come in a bit lower than the company’s own estimate of 6,900, which was announced in January.
But the real fuel for TSLA stock actually came from the bullish outlook. For the current year, Tesla says it will hit 35,000 car deliveries, whereas analysts were expecting numbers between 30,000 to 32,000. The main reason for the spurt is China — on the earnings call, CEO Elon Musk said that demand is on fire, and the only bottleneck is production constraints.
Not a bad question to have.
To gear up for the aggressive production targets, TSLA has been investing in more infrastructure. At the heart of this is the Gigafactory, which is a state-of-the-art battery factory with a goal of radically dropping the price on battery packs. Tesla is seeking out the help of global partners to achieve this, but the effort will be far from cheap and might weight on margins. In fact, it could even necessitate additional capital raises, which would dilute TSLA stock.
But hey … Wall Street doesn’t seem to care about anything as long as Tesla keeping up the growth.
Another potential driver ahead is Tesla’s Model X sport utility vehicle, expected to go into production in early 2015. Unlike the Model S, this car is more focused on the mainstream market, where competition is a bit more robust — there are more brands, and Tesla will be competing more heavily on price. It’s funny to think: TSLA might even have to engage in traditional advertising to get traction … and if so, again, those margins could be at risk.
TSLA stock has already factored in near-perfection (Musk himself has said the stock is overvalued), and Tesla’s market cap of $25 billion is almost comical considering how large it is when put up against Ford’s (F) is $60 billion and General Motors’ (GM) $57 billion … despite producing only tens of thousands of vehicles instead of millions.
Still, betting against TSLA stock has been a losing strategy for some time now. Just ask anyone who has been short Tesla to show you their scars. Tesla is a classic momentum stock, and while momentum never lasts forever, those who try to guess the peak and guess wrong can get hurt in a hurry.
Tesla is rethinking a stale industry, has a brash visionary at the helm and offers standout products. Plus, it has a knack of beating sky-high expectations.
That’s a winning combination. As long as TSLA shows no signs of that changing, Tesla will probably continue to be a pain for the shorts.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
