Nevada is undoubtedly, very excited about the recent Tesla (TSLA) deal, even though northern Nevada already has Apple (AAPL), Amazon (AMZN), Cisco (CSCO), Intel (INTC), Intuit (INTU), Microsoft (MSFT), Oracle (ORCL) and many more technology companies coming all the time thanks to lower business taxes.
Tesla is also able to extract a huge tax incentive from the state of Nevada, according to The Wall Street Journal. Specifically, the WSJ discussed how Tesla received $1.3 billion in tax breaks to build its $5 billion lithium battery factory in northern Nevada. These tax breaks include no property taxes for 10 years, no sales taxes for 20 years and $195 million in transferable tax credits that it can sell to other businesses. In addition, Tesla will also receive a 10% to 30% electricity discount for eight years.
Nevada Governor Brian Sandoval is very excited about securing the Tesla deal and is rightly very proud that he beat out the other western states trying to woe Tesla. The WSJ article pointed out that Nevada also paid 15 times more than any other state to attract the business. As a result, Governor Sandoval’s stature is rising on the national stage, and I suspect the criticism about the price he paid to woe Tesla will soon fizzle.
Given the growing popularity of Teslas and the development of a massive factory in Nevada, one might think that Tesla is a good investment opportunity, but nothing could be further from the truth.
I have never recommended Tesla stock because it’s a little too rich for my blood. I am unwilling to pay more than 12 times forecasted sales and 500 times forecasted earnings for a car company that is running out of batteries. That’s right; the real reason Tesla has to build a new battery plant is that it has cleaned Panasonic out of the lithium batteries it uses in the Model S, and it desperately needs to make more efficient lithium batteries.
At more than half the market valuation of General Motors (GM) — $32.3 billion vs. $54.5 billion — there is no doubt that Tesla is grossly overvalued. In addition, analysts have been revising their estimates dramatically lower as of late. The consensus estimate for the current quarter is $0.02 per share, which is down 94% from the estimate just three months ago.
Portfolio Grader downgraded Tesla from an “A” to a “B” just four months ago. Tesla’s earnings momentum now garners an “F,” earnings growth a “C” and analysts earnings revisions a “D.” So right now, I would recommend avoiding Tesla shares.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
