TRANSLOGIC 113: 2013 Tesla Model S


Tesla Motors is the the best performing stock in the world so far this year, up 410 percent, reports The Wall Street Journal.

It is an amazing story considering the hostility and doubt so many analysts have around the future of electric vehicles--the only kind of vehicle Tesla currently sells.

What seems crazy is the way Tesla's share price keeps climbing even after leading analysts and columnists (including this one) said it was vastly over-valued at much lower prices. The company's share price climbed 25 percent last month alone, and is around $170 a share.

Goldman Sachs, for example, said in July that the fair market value was more like $90 a share, and the investment bank issued that estimate when the price per share was already above $120.00.

Tesla's current market capitalization--the value of the outstanding stock--is above $20 billion. That compares with a market cap of about $64 billion for the much larger Ford and $50 billion for GM.

Tesla is on pace to deliver 21,000 vehicles this year, and only about 12,700 of the Model S luxury sedan have been delivered to date. Even Ford's Lincoln brand does better than that.

Investors are betting on a very bright future for Tesla, not so much looking at today's share price in the context of a price-multiple to current earnings. And futures are gambles. Consider that almost 5,000 Teslas were registered in California in the first half of 2013, a bit less than half of the company's total output. Reliance on California, and specifically on wealthy Silicon Valley customers, should give pause to investors who insist Tesla shares have room to run yet.

BusinessWeek notes that Washington State is actually the best state per capita for Tesla, with Washingtonians buying one Tesla per every 100 vehicles sold. The Seattle metro area has, of course, quite a concentration of dot.com and silicon millionaires being home to Microsoft and a long list of supplier companies to the digital and software giant.

And here is something about Tesla that few people appreciate: it's an American car. Sure, some of its parts are surely imported. It's founder and CEO Elon Musk was born in South Africa. But it is an American-based company and the cars are being built in California by American workers. Toyota is a minority stakeholder, but it still qualifies as an American car company and American brand.

Who says domestic automakers can't get it right?