Tesla Motors Inc: Elon Musk Is No Jeff Bezos (TSLA)

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TSLA - Tesla Motors Inc: Elon Musk Is No Jeff Bezos (TSLA)

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I don’t gamble. It’s not a religious thing; I’ll invest on long odds if I believe in a company’s case (which is why I’ve made a lot of money on Amazon.com, Inc. (NASDAQ:AMZN) over the past few years). But I have not yet put a dollar on Tesla Motors Inc (NASDAQ:TSLA) and CEO Elon Musk, whom some analysts have compared with Republican Presidential standard-bearer Donald Trump.

elonmuskmsn

Like Trump, Musk tends to make huge (pardon me, “yuuge”) promises that can blow up on the launch pad. He’s always coming to the market for new capital, and when something does work, Musk seems to wind up with the lion’s share of the gains.

His visions, however, are more Amazon than Donald Trump: Electric cars make sense. And Musk has proven he can deliver high-end electric vehicles, in some quantity. Autonomous cars are coming.

The ideas behind his PowerWall (which are large lithium-ion batteries like those in your cell phone) and SolarCity Corp (NASDAQ:SCTY) solar panels make perfect sense in theory. Making an entire roof out of solar panels is an idea that’s been around for a decade.

Here’s my problem with all of this: While Bezos has retained a single vision for two decades (the creation and use of e-commerce infrastructure, scaling it naturally alongside revenues), Musk is tackling many problems at once and pouring capital into ever-riskier ventures before scale is proven.

And while AMZN stock has sometimes hit an investable level, TSLA stock quadrupled in 2013 before anything about the company was proven, and has stayed near that level ever since. I haven’t been able to justify getting near it.

Tesla (TSLA) Stock Has Huge Risks

Tesla makes a great, high-end car, but it has taken deposits on 373,000 lower-priced Model 3 vehicles before producing a single one. Tesla has proven it can deliver about 100,000 cars a year, based on third-quarter deliveries, but now Musk is promising to quintuple that in two years, and double that figure in two more?

If we get a severe recession at any point in the next few years, which is possible, and the world’s appetite for risk goes away, what happens to these big scaling promises? Does he have the $5 billion on hand to deliver the Powerwall, at scaled volumes, and the cash needed to fill SolarCity’s Buffalo, NY panel factory?

The fact is that Musk is making new bets before any really come in.

I would really love to be wrong about this. America is all about up-and-coming risk takers and Musk’s vision is, in theory, a sound one. My problem is that TSLA stock, with a $30 billion market cap and trailing year revenue of $4 billion, is priced based on the assumption of success. That success is simply not assured on many, many fronts.

Essentially, investors are assuming that Elon Musk is Jeff Bezos before he has proven he can scale. They’re playing a longshot on short odds. In my view, AMZN had proven itself at $300 per share. Tesla has yet to prove itself at $200.

That’s a game I just won’t play.

As of this writing, Dana Blankenhorn did not hold a position in any of the aforementioned securities.

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Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Tweet him at @danablankenhorn, connect with him on Mastodon or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/tsla-tesla-stock-tesla-motors-inc-elon-musk-donald-trump-jeff-bezos/.

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