I have long been bearish on Tesla Inc (NASDAQ:TSLA). But while I’m not yet ready to say it’s fully valued, it may be time to admit it may survive.
During the last 12 months, the company came very close to being cash flow positive. Its factory in Fremont, CA is finally ramping up production, and production should top that of Volvo in 2018.
Best of all, the company has a hit product that it is successfully ramping. Tesla’s Powerpack technology has that part of the company alone worth $10 billion. That means the car company only needs cover $40 billion of market cap.
In 2017, Tesla brought in $11.76 billion of revenue, which means market cap will soon be just four times equity. As Tesla stock continues to fall, opening for trade near levels last seen in November, speculators might start seeing an entry point again.
The Tesla Stock Haters
That doesn’t mean the Tesla stock haters are gone and bless their hearts for the hating. Without sellers, you can’t have a functioning market.
The bears insist Tesla is outgunned on the capital front and facing a cash crunch. But its rivals are divided. It’s not facing one giant $267 billion cash hoard, but a dozen smaller ones. Tesla has enough cash and borrowing capacity to run its own race.
There is ominous talk of a slowdown in deliveries to Norway, which loves the Tesla, but that’s just a bunch of cars that can go elsewhere. Tesla is far from putting unsold cars on parking lots. It’s only now going through the first day orders for the Model 3. It has about 325,000 total orders for the car. Put that backlog against others’ cash positions and I get a wash.
The Tesla Lovers
Fact is that Tesla is now producing cars that drivers love — in quantity — and getting them to pay up for them. The second season of Amazon’s The Grand Tour featured noted Tesla-hater Jeremy Clarkson tooling around in a Model X SUV and coming away impressed, if unhappy with a price tag north of $200,000.
Tesla is happy enough with production to let one of its production engineers talk to reporters, and the Tesla semi-truck, which was laughed at when it was announced late in 2018, is drawing hundreds of orders from delivery companies that have to operate inside cities that don’t like diesel fumes and loud engines.
The Tesla Transformation
The bottom line is this: In five years Tesla has completely transformed the automotive business, and the power business.
Every car company now has plans for electrics and autonomous vehicles on their drawing boards. That’s a quiet revolution, and it would not have happened but for Tesla.
But is the company properly priced at $300-per-share and a market cap of $50 billion? No. It’s purely speculative. But unlike every other company on the planet, including mighty Toyota Motor Corp (ADR) (NYSE:TM), Tesla has made money for its stockholders over the last five years. Tesla shareholders who came in at any time during 2013 have doubled their money.
Where does Tesla stock go from here? If I were to guess, it’s going to float downward. The valuation must, at some point, start matching performance, and we’re nowhere near that point yet. But when the two do match, it will probably be at a valuation much higher than where the bears imagine it to be, perhaps one not too far away from where it is now.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.
