Tesla Motors responses
Tesla Motors
Tesla Motors is the “it” stock right now in the automotive industry. Tesla was a pioneer in offering cars that run 100% on electricity rather than gasoline, and it has also diversified into solar energy, purchasing the company SolarCity. Its stock price has risen high enough in recent years that it has surpassed automobile giant General Motors in market valuation.
However, not all analysts believe Tesla is a good investment at its current price. It sells less than a 100,000 cars per year, compared with General Motors which sells around 10 million cars a year. Unlike General Motors, Tesla has yet to earn a profit.
Here are some articles both pro and con about whether you should invest in Tesla. Take a look at these articles and also try to find some more recent articles on Tesla’s stock:
https://www.forbes.com/sites/johnwasik/2017/04/14/5-reasons-why-tesla-is-bubble-priced/#d0626b26c631
https://www.smarteranalyst.com/2017/03/16/5-reasons-excited-tesla-inc-tsla-stock/
Based on what you’ve read, do you think Tesla is worth its high valuation, or is it simply priced too high because it is considered new and trendy? Would you personally invest in Tesla, or would you prefer to invest in one of the more established auto companies such as GM or Ford?
Student 1
Sena Walker posted Dec 12, 2017 5:42 AM
This may be the financial conservative in me that is speaking, but I’m not sold on the Tesla trend. I would lean toward investing in GM or Ford before I looked at Tesla. I feel that the stock is over inflated based on the fact that its innovation is heavily dependent on its CEO and the deep pockets of its competitors like GM could very well come up with a similar car cheaper in price, manufactured quicker and readily available at its hundreds of thousands of existing sales lots (Divine, 2016). There is also concern of the negative cash flows that the company generates (Morningstar, 2017). How is the company going to survive long term if it spends more than it makes? In my personal opinion, the trend of self-driving completely eco-friendly car will not catch on until they are cheap enough to buy, and are readily available at any car lot. As awesome as a self- driving car would be, humans are unpredictable. Until more people out there are driving these cars and less amount of human error is out there, the risk of a fatal crash in one of these is extremely high (Vlasic & Boudette, 2016).
Would you invest in something that is likely to kill someone because of human error? Tesla needs to convince its customers that their technology is safe and make its product more readily available to customers before they can be truly successful.
Divine, J. (2016) Buying Tesla (TSLA) Stock: Either Brilliant or Devastating. U.S. News. Retrieved from https://money.usnews.com/investing/articles/2016-07-14/should-you-invest-in-tesla-tsla-stock
Morningstar (2017) Tesla Inc: TSLA. Retrieved from http://www.morningstar.com/stocks/XNAS/TSLA/quote.html
Vlasic, B. & Boudette, N. (2016) Self-Driving Tesla Was Involved in Fatal Crash, U.S. Says. The New York Times. Retrieved from https://www.nytimes.com/2016/07/01/business/self-driving-tesla-fatal-crash-investigation.html
Student 2
Randy Boucher
Nevertheless, over the last five years Telsa has been showing significant gains. On December 10, 2012, the stock was selling at $33.18 a share and is closed at $328.91 on December 11, 2017 (Yahoo Finance, 2017). Telsa’s beta is 0.67, which indicates its risk is not substantially high considering it fluctuates less than the market (Yahoo Finance, 2017). However, over the last year Telsa has had some low dips and some substantial peaks at one point the stock was as low as $192.19 and was as high as $382.61 (Yahoo Finance, 2017).
I believe people are investing for what they believe the future will bring. Eventually, clean energy will be more practical, when an organization like Telsa produces stronger batteries that are quicker to charage. This will change the future just as the iPhone change the world. I think some people are gambling this change is going to take place. I also believe the stock is currently overpriced. Especially after completing the computations of the case assignment on module 2. I do not prefer to invest in car manufacturers. I have avoided Telsa, however, I have been considering this investment if I can find a dip.
Reference
Harriet, L. (2017). 5 Reasons to be Excited About Tesla Inc (TSLA) Shares. Retrieved from SmarterAnalyst: https://www.smarteranalyst.com/2017/03/16/5-reasons-excited-tesla-inc-tsla-stock/
Telsa. (2017). Charging. Retrieved from https://www.tesla.com/charging
Wasik, J. (2017). 5 Reasons Why Tesla Is Bubble Priced. Retrieved from Forbes: https://www.forbes.com/sites/johnwasik/2017/04/14/5-reasons-why-tesla-is-bubble-priced/#14ff068826c6
Yahoo Finance. (2017). Telsa, Inc (TSLA). Retrieved from https://finance.yahoo.com/quote/tsla?ltr=1
Student 3
· Kathryn Donahower Mon at 4:15 PM
· Tesla has been in business for 14 years (Lefton, 2017) but still only had "two profitable quarters and lost $773 million last year (Wasik, 2017, paragraph 6)". GM out earned Tesla and out produced Tesla in the last year (Ferris, 2017). Still Tesla stock rose (Ferris, 2017). So why is Tesla stock so over valued? I think there is a lot of speculation involved with Tesla and Elon Musk. Elon Musk is a risk taker (Wasik, 2017), in business and innovation. There seems to be some type of desire to jump on the wagon before it leaves you behind. Investors are looking for that one stock that will make them millions. According to US News, Divine (2016), feels the stock is likely just a "rip off" based on the market values. Speculation is likely the largest factor in the overvaluation of Tesla stock. Electric cars, sustainable energy, and self driving cars are all new and innovative. Getting in on the ground level could provide a lot of profit if the stock takes off. Buying stock is all about buying a expected future return (Colvin, 2007). This happened with Google back in the early 2000's when it's shares went for over $500 (Colvin, 2007). Later the stock bottomed out when it split in 2008 (Stoffel, 2016). Looking at Tesla stock I would not invest in it at the current price of $328.91 (Nasdaq/TSLA) when I can get GM for 41.67 (Nasdaq/GM). I believe Tesla will start to lower the cost of its production and see more profitable quarters. However, my money is on GM as a more solid steady investment. Colvin, G. (2007, July 24). Don't go gaga over Google. Retrieved from http://archive.fortune.com/magazines/fortune/fortune_archive/2007/08/06/100141308/index.htm DeBord, M. (2017, Dec 2). Tesla's biggest threat is now GM. Retrieved from http://www.businessinsider.com/teslas-biggest-threat-now-gm-2017-11 Ferris, R. (2017, April 10). Tesla passes General Motors to become the most valuable US automaker. Retrieved from https://www.cnbc.com/2017/04/10/tesla-passes-general-motors-to-become-the-most-valuable-us-automaker.html General Motors. (2017, Dec 11). Nasdaq/GM. Retrieved from https://www.bing.com/search?q=gm+stock+price&qs=FN&pq=gm+stock+price&sc=8-14&cvid=0B8D18FF9DB84AC0B593AC478C451F0D&FORM=QBRE&sp=1 Lefton, H. (2017, March 16). 5 Reasons to be excited about Tesla Inc. (TSLA) shares. Retrieved from https://www.smarteranalyst.com/2017/03/16/5-reasons-excited-tesla-inc-tsla-stock/ Tesla. (2017, Dec 11). NASDAQ/TSLA. Retrieved from https://www.bing.com/search?q=Tesla+stock+price&qs=n&form=QBLH&sp=-1&ghc=1&pq=tesla+stock+price&sc=8-16&sk=&cvid=98BE5C72423D43C189BC0F24C0DD73D7 Wasik, J. (2017, April 14). 5 Reasons why Tesla is bubble priced. Retrieved from https://www.forbes.com/sites/johnwasik/2017/04/14/5-reasons-why-tesla-is-bubble-priced/#4403bb4e26c6 Reply