Buy TSLA Stock Before It Gets Bought Out

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Elon Musk’s Tesla Motors (TSLA) has been one of the hottest stocks this past year. As the electric automaker continued to sell more vehicles, TSLA stock surged new to highs. Overall, TSLA stock managed to impress analysts and investors alike with more than a 300% gain in 2013, making Tesla one of the best-performing equities period.

tsla-stock-tesla-stock-gm-f-elon-muskHowever, investors shouldn’t expect the same kind of huge gains from TSLA stock in 2014.

Growth is still there as TSLA continues to expand and sell more electric vehicles. But the reason why investors won’t expect those kind of huge gains this year is that TSLA stock may not be around much longer.

Rumors are beginning to circulate that TSLA may be for sale and could be scooped up by one of the large U.S. automakers. Elon Musk’s history of venture capitalism certainly makes those rumors plausible.

The time for investors to buy TSLA stock is now — before it gets bought out.

TSLA Stock For Sale?

While TSLA has succeeded in the electric car market, many other automakers have failed miserably. Aside from limited sales of Nissan’s (NSANY) Leaf, the electric vehicle market is basically a one-trick pony — with TSLA leading the show. And with worldwide demand for electric vehicles set to explode to 3.8 million by 2020, the major automakers are feeling the pinch to do something.

Cue the (as of now, baseless) TSLA stock buyout rumors.

According to a recent report in USA Today, Musk could be setting up TSLA for a big buyout before the end of the year. Citing trader Yra Harris of Praxis Trading, Tesla Motors may be sold to General Motors (GM) or Ford (F) in the upcoming year. While that may seem a little crazy at first blush, there is some validity to Harris’s TSLA stock claim.

First, both F and GM have struggled in the plug-in hybrid electric vehicles (PHEVs) category. Unlike TSLA, which is seeing rising demand for its models, GM has actually seen some pretty big declines in Chevy Volt sales. Overall, GM sold 3% fewer Volts in 2013 than it did in 2012. As for its plug-in Cadillac ELR — which targets the same sort of clients as Tesla does — sales have been anemic at best. Meanwhile, Ford’s electric Focus can only muster sales of roughly 200 per month.

Given the potential PHEV growth, a bolt-on acquisition like TSLA begins to make some real sense for both GM and F. People are fanatical for their TSLA cars, so presumably sales will continue. At the same time, both GM and Ford offer TSLA the ability to scale up operations. With ambitions of expanding into China dancing in his head, Musk needs to produce more than 5500 cars per quarter. Selling to a major automaker makes that goal a lot easier.

History is another big reason why TSLA stock could soon become private.

Musk is venture capitalist — the kind of person who thrives on exit events and moving on to the “next big thing.” Musk certainly has a history of doing just that. He founded payment system PayPal — which later went public and was bought out by eBay (EBAY). At the time, eBay was struggling to create its own online payment system, similar to what is going on at F and GM, today.

After the deal, Musk never looked back.

With SolarCity (SCTY), Space X and his Hyperloop project now taking up his time, Musk could be looking to cash out of TSLA and move on. And with 27% of TSLA stock under his wing, he is clearly calling the shots at the electric vehicle maker.

A TSLA Deal Is Possible

Ford and GM undoubtedly recognize the potential upside of buying out TSLA … if the price is right. TSLA is an expensive pill to swallow for both automakers with a current market cap north of $18 billion, making it a very pricey acquisition.

However, the major automakers might just need to shell out that kind of cash in order to compete with TSLA in the PHEV space.

For investors, that could mean buying TSLA stock today, before Ford, GM or even Toyota (TM) — who already has partnered with TSLA on batteries — comes calling.

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

Aaron Levitt is an investment journalist living in Ohio. With nearly two decades of experience, his work appears in several high-profile publications in both print and on the web. Also likes a good Reuben sandwich. Follow his picks and pans on Twitter at @AaronLevitt.


Article printed from InvestorPlace Media, https://investorplace.com/2014/01/tsla-stock-elon-musk-scty-ebay/.

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