This page has been archived and commenting is disabled.
Tesla: Where Retail Investors Rushing in and Nest Eggs Cracking
By EconMatters
It seems every year there are a few momentum stocks defying logic, reality while bleeding all shorts getting in the way. This year, Tesla Motor (Nasdaq: TSLA) is one such stock which hit $188.64 on Friday, Sept. 26.
![]() |
| Chart Source: Yahoo Finance, Sept. 28,2013 |
We are talking about a $35ish stock just on Jan. 2, 2013, and the company only reported its FIRST EVER profitable quarter in May. Goldman Sachs (GS) did do a reality check on Tesla's margin in July, and the stock did go down by $18.21 in one day on July 15. However, a forgiving market with crazy liquidity (thanks to Fed's infinite QE), investors just blew GS off and the stock's never looked back.
Now the latest Tesla warning came from BofA Merrill Lynch dated Sept. 23 -- Smart-money big boys are getting out of Tesla, and guess who are the buyers...Retail Investors!
"Institutional ownership of Tesla stock has faded throughout 2013, from approximately 84% of shares held in January to about 66% today. As a result, it now appears that retail investors are playing an increasing role in driving the stock price higher and could be at risk when a correction, which we believe is long overdue, ultimately occurs."
More importantly, BofA Merrill Lynch thinks Tesla price objective (PO) should be at $45! (That's 76% lower than the closing price on Friday.)
"We continue to view Tesla shares as vastly overvalued and maintain our $45 PO, which is based on a 2015e EV/EBITDA multiple of about 12X (currently 12.7X). We note that our valuation multiple is relatively consistent with the simple average of 2015 EV/EBITDA multiples for a group of 35 growth oriented tech companies, based on consensus estimates."
![]() |
| Chart Source: BofA, Bloomberg |
The reason for such pessimistic view on Tesla going against the market herd? BofA noted:
We estimate that Tesla’s current share price implies approximately 628K vehicle sales in 2020 (versus an estimated 21K in 2013).....Generating luxury margins on a mass market vehicle is likely to prove incredibly challenging, and represents another major hurdle to the bull case, in our view.
In other words, the current valuation might remotely be reasonable if Tesla were the only game in town without the competition from GM, Toyota and BMWs.
Fundamentally, I can see why even a typical bull like GS would have concern -- TTM financial ratios related to profitability and margins of Tesla are ALL NEGATIVE or meaningless since 2008! (See Screen Shot from S&P Capital IQ)
Does This Look Like a $188 stock to you?
![]() |
| Source: S&P Capital IQ |
Some analysts argued that Tesla requires an unconventional approach to valuation due to Tesla's special 'advantages'. However, I think the current price point of Tesla stock is unlikely to be justified by any reasonable and logical model, however unconventional it needs to be. And it looks like a lot of the institution smart money investors agreed and have already cashed out judging from the BofA analysis.
Approaching it from a common sense point of view, Tesla is already exhibiting signs of a bubble when you see quotes like this:
“It’s what Marty McFly might have brought back in place of his DeLorean in Back to the Future.” ~ Consumer Reports, May 2013
And when Tesla’s chief designer, Franz von Holzhausen, pulled out the Apple and 'iPhone Moment' card when he tried to explain why the car has a touchscreen:
“It’s like the leap of faith Apple (AAPL) took with the iPhone. The screen is the hero. We are in the midst of that transition toward a new way of thinking. For me, it’s that iPhone moment.”
My take is that it seems a pretty smooth move implying Tesla, essentially an auto maker in the manufacturing sector, is a 'peer' of Apple, an international icon tech company.
The Christian Science Monitor (CSM) just published an interesting article questioning how Tesla could be worth almost half (46%) of General Motors in terms of market cap. This caught my eyes because typically CSM is not a site where you find articles talking about stock valuation. As such, CSM did not cite the financial lingos such as forward PE, etc, but rather based it purely on the fact that
"GM has built over 450 million cars in its 105 years while Tesla has made about 25,000 over 10 years."
A lot of times, the most basic question is usually the most important one that retail investors should ask before getting into Tesla.
© EconMatters All Rights Reserved | Facebook | Twitter | Post Alert | Kindle
- advertisements -





I find it interesting Tesla badly needed financing just one day before they would have been broke, Dec 31, 2008...tough financial times to have a new, capital intensive business. What would car industry look like without them?
https://www.youtube.com/watch?v=8_lfxPI5ObM
Sometimes orgs are at right place right time and seem to have some decent sense, instincts that they don't totally flub it up. Those companies can do extraordinarily well, even when leadership changes. Apple did it three times, Apple 2 just when PCs rocketed off, with the aid of their friend Visicalc that made machines that were expensive hobbies into business mahcing that return their value within a few months. The Mac which did poorly at first, rode the wave of desktop pbulishing revolution...and then Apple hit on music players andmobile, tsunami of computer. Being the "it" company at the start of these things can bake in great profits for years. When they introduced Iphone in 2007, Jobs said it would take 5 years before anyone would catch up, which was about right, and Andriod more or less did catch up by 2012. On tablets things are getting there now.
Tesla seems like one of those companies, but they won't have the amazing profit machine that tech companies have gotten from being the "standard", they will have more competitors, but still for many years, they will have an edge in an new growing part of a huge consumer market.
Tesla is on the front of wave, (not tsunami), of electric cars taking over a big share of the market. They have advantage of being young, a younger cheaper workforce, company systems and production methods taking advantage of most state of art technology and seem to have nailed design, look and feel. I have heard many Californians, in my mind the most car obsessed people, talk reverentially about Teslas, even onse who had no interest in electric cars previously and would have never bought a Prius. Speaking of...look at all the money Toyota made by dominating hybrid segment with that well-liked car. I routinely saw people passing up $200-$250 month leases of very nice Honda Accord hybrids to buy $450 lease on Prius.
Tesla also seems adept on coming up with best combo of most current tech, did well using boring batttery tech in better way and now have a patent combing their traditional car battery system that can be re-charged frequently with another battery for longer ranges, that doesnt like lots of re-charing, but for most users will rarely get used. With this their cars will be over 400 miles in normal driving conditions wihtout needing a re-charge. Its a relatively simply re-purposing of existing tech, that is usually more about excellent engineering implementation than innovation that seems a recipe for success for these market-share grabbing companies.
And don't discount the potential for growth in electric car market. In Europe the potential is huge, in Norway, a Tesla practically pays for itself in toll savings, tax breaks, gas price etc and more countries will likely be doing more of same in policy. As charging stations become more frequent, electric cars will appeal to more consumers. Battery tech will keep getting better, not exactly Moores law, but like charging stations, as more car companies enter market, more incentive to improve batteries etc...
So many dot coms got pumped and dumped but a few brilliant ones went huge, Amazon, Google...when markets are changing, the ones on the front of that wave that don't blow it, can win big. Tesla looks like a big winner.
dbl post
http://blogs.barrons.com/stockstowatchtoday/2013/09/30/toyota-sees-no-ma...
And on the madness continues
Tesla will soon come out with a sports car powered by rocket engines from SpaceX, gets 18,000 miles per thousand gallons of hydrazine, totally nonpolluting since the pollutions ends up on the moon. What does GM have to compete with that?
The name TESLA should have made some of the sheep retail investors to at least give some thought to the origins of the name. Tesla inventions were huge breaks for the thieves to come in and steal. Tesla never got the credit he deserved.
Thanks for providing the link to the Christian Science Monitor (CSM) article. An interesting point of view to be sure.
Playbook: ramp up some stock, get the retail crowd foaming at the mouth to buy, sell the ramp before it fades leaving retail holding the bag.
Lather, rinse, repeat.
They did it during dot bomb with the investment banks. Clinton also helped. This is even worse fascism with O. People laud Silicon Valley but it is actually pretty evil with lots of intel/MIC types funding these companies in many cases to scam main street.
I just bought an electric smart car for $25k. It works really well. With all the tax credits/rebates etc it ends up being about $15k. It's nice driving past the pumps but I mostly bought it as insurance for when the SHTF. I charge it up with solar power.
I bet you can also hide it in spots many other cars couldn't, therefore, to have some travel routes closed to cars but still open to ATV's and also to just flat out hide from looters. Depending. Won't work every time but having the option open is good.
Then again, those SHTF buses from Mad Max / This is the End would play soccer with your car.
Smart move!
..talk about SHTF..
I plan to buy this one, then I can charge it directly, I plan to put a big funnel in front of it to get more shit to hit the fan
‘Wind-Powered’ Electric Car Build by Chinese Farmer:
http://electriccarsreport.com/2012/05/wind-powered-electric-car-build-by...
It has potential. I posted there recommending he use some desk fans on the big ass square rear view mirrors. The funnel idea may have merit as well.
So you are saying there is a...chance..that it can still go higher, right?
"So you are saying there is a...chance..that it can still go higher, right?"
Yes, same with the cost of electricity
Obama: My Plan Makes Electricity Rates Skyrocket
http://www.youtube.com/watch?v=HlTxGHn4sH4
Tesla is the new Iomega.
LOL. To be fair my zip drive turned into an amazing benefit to me before CD burners were affordable. I got my money's worth out of it. Hard to think now, though, a tiny USB drive barely as big as the end of my index finger can store 160 of those little zip disks.
When retail inventors see a stock go from $35 to $180, for some reason they think buying at $180 will see it go to $700.
The lure of apparent free money is too good to pas up.
Retail investors are idiots. They know absolutely nothing about business. They can't seem to do simple math that proves the priced in growth is impossible. All they see is, "STOCK WENT UP, I MADE MONEY, YOU GUYS ARE JUST HATERS, ELON MUSK IS A GENIUS."
You tell them that Elon Musk is a fraud, that he didn't invent PayPal, didn't start Tesla or SpaceX, and didn't design the Hyperloop, and they look at you like you called their mother a whore.
It's not 628k vehicles by 2020, that implies Tesla's current margins and includes the sale of EV credits. Even a decrease of 25% margin brings the total cars that need to sell to over 1 million. When you take away the green credits, that number jumps to over 1.5 million.
As I said before. In order to meet Tesla's current valuation the company will have to sell more cars than the entire luxury sector in US sales of every single car manufacturer combined by 2020.
Think Tesla can sell more cars than BMW, Mercedes, Audi, Jaguar, Porsche, Lexus, Infinity, Acura, Cadillac, Lincoln, Volvo, and Land Rover combined?
"When retail inventors see a stock go from $35 to $180, for some reason they think buying at $180 will see it go to $700"
I've never been able to get my head around that simple fact about retail investors. I am sure I have lost millions, not being able to be the guy who thinks that buying higher+ is the way to play the markets. I catch myself waiting to short a Tesla type stock at a some higher preconceived level and when it ultimately gets there I have to wonder, why didn't I just buy it before it got there if I believed it would reach that level? Follow price is the mantra they say, and that works till it doesn't. If you've been through bear markets you know that when it doesn't, it really doesn't. I suspect there is more than a lot of "new money" out there in today's market (think about the reason for low labor participation) and you can see what looks to be coming ...
Yup. I think Peter Thiel was the real brains behind PayPal. Thiel runs a hedge fund. Musk is just an Oba stooge like most of evil/NS-CIA Silicon Valley. Stanford turns out a lot of smart people but Silicon Valley is really ethically challenged.
The old Silicon Valley scam was the dot com pump and dump with the investment banks. This is a little to dangerous to run this scam a second time. So they all suck up to the Stasi police state. So who's stocks get pumped with free fed money with algos, HFT and futures? Friends of O. This includes Tesla, Facebook, Amazon, probably Starbucks, Oracle (another see eye Al Queada start up), Google (N*S*A out fit) and Yahoo since the friend of O became CEO plus a few others.
All these stocks get pumped with free govt money and help from Chicago.
Tesla claim to fame is the batteries supposedly get more mileage than most. I don't believe they have figured this out like they claim. I do like the idea that I supposedly can drive 240 miles on $4 of electricity. I also like that less shit supposedly breaks and you just replace tires though I doubt that is not the reality. How often does stuff break on a Tesla.
BMW has announced just a few days ago that all BMW models will eventually have plug-in hybrids.
Tesla, Musk, Jew
Amazon, Bezos, Jew (according to The Jewish Press)
Google, Brin & Co, Zionist Jews to the core
Starbucks, Schultz, Jew
Facebook, Zuckerburg and NSA, Jew and ZOG respectively
Oracle, Ellison, Jew
Yahoo, Yang, Gentile, but Ross Levinsohn had the till for a while (and the kosher meals at the company's exec dining rooms are still plentiful)
Too much of a coincidence? (Rhetorical question)
I am not saying tesla is worth $188, but this article claims that more retail participation is a sure sign of over valuation based on a single stat that institutional holdings have declined this year - are we sure that stat accounts for the stocks rise in value? Institutions don't move as quick as retail when it comes to trends - there are institutions holding jc penny stock whereas the retailers were gone long ago. Sure some retail investors are idiots but there is plenty if not more dumb money sitting with institutions. They were the last to jump into google and apple, what percent of those stocks are retail vs institutionally owned? Give us some context. Of course tesla is overvalued at this price but it was greatly undervalued 9 months ago when the whole world thought they couldn't make money. The fact that retail has moved in a little (or a lot? Who can tell from one meaningless stat?) is not as important as this article implies.
The bigger story that is being missed are the companies that will build the electric car infrastructure as BMW et al start going all electric to compete with tesla the whole industry starts to go electric that could be the start of the biggest revolution of our age that would make the smart phone revolution puny by comparison.
Watching what the Germans do is more interesting. BMW, Porsche, VW, etc. BMW is sticking with a gas engine and electric. The I8's small turbo (3 cylinder) gas engine is pretty interesting technology. It puts out 220 hp. BMW in the 1980s had a F1 engine 4 cyl turbo that put out as much as 1300 - 1450 bhp.
Musk cannot do this:
http://www.youtube.com/watch?v=HI8PjqRl_po
If BMW can get 1400 bhp out of a 4 cylinder in the 1980s - they can create a better hybrid to kick Tesla's arse.
The BMW i8 does a full charge at 220 volts in 2 hours and will average about 80 mpg. My guess is BMW will get even better at it because the i3 and i8 are there first cars. They are catching up fast.
http://en.wikipedia.org/wiki/BMW_i8
BMW had been going down the hydrogen path and had 7 series hyrdogen powered road cars in full testing. I think they see hybrids as the way to go. VW has small diesels Polo's that can get 80 to 95 mpg.
If the Germans go full out then Tesla is toast. The sh*t they can do with cars and the off the shelf technology they have is pretty staggering.
A German created PayPal not Musk. A Ukrainian helped Theil but Musk's resume is way overhyped.
Oh, fuck y'all...you're all haters...It's going to 300 (hic)...