Chevy Volt a Failure - GM to Layoff 1,300

Tesla's stock bounced a few days ago on a report that Apple's head of M&A had met with Musk sometime last year. Musk then verified the report.

If I owned Apple, it would make me nervous if Apple ever bought Tesla. First there is the valuation the company is at right now. Apple would have to be stupid to pay that much. But even with that, when a company -- even one as dominant as Apple -- is looking that far out of its core competency, it signals that it doesn't think it can grow much more with what got it this far.

It's more likely that instead of talking about Apple buying Tesla, they were talking about a partnership of some sort -- maybe with regard to the battery plant that Musk has talked about building.

 

When I saw the thread revived. ... and who posted, I thought for sure it was going to be about Tesla's stock price today. Although I saw the Consumer Reports thing, too.

Tesla stock was another 17 percent at one point today and it closed up about 14 percent on the day.

Morgan Stanley upgraded the stock and put a ridiculous price target on it. All based on hype about the battery factory that Elon Musk has been talking about (and is going to announce within a week, even though he has been doing his usual carnival barker routine for a while on it).

I saw something on Zerohedge this morning -- Tesla's enterprise value is now $30 billion, which is just 25 percent less than GM's!!! GM might look ugly on paper as a business, but it least it HAS a business. It's not valued on endless hype. It sold 9.71 million cars worldwide last year.

Tesla sold 22,477 cars last year.

Tesla also lost $74 million in 2013, lost $16 million for its most recent quarter that it reported last week, and has a debt-to-equity ratio of 1.2 (it is loaded with debt). This has to be the most overvalued joke ever to publicly trade.

I know Consumer Reports loves the car, and it may be a really elegant car, but their rankings don't take cost into consideration. It could be a great car loaded with bells and whistles, but in the end sales and margins are what matter. And Tesla has neither.

At that price, I still don't see how there is any mainstream potential for Tesla. And obviously the company doesn't either, because the new hype has shifted to them being able to commercialize batteries in a way no one else has been able to do, lower the battery cost by 50 to 70 percent, and be able to market a car that makes sense for a broader audience.

That is A LOT of if, though. Nobody, let alone Elon Musk, has shown an ability to do those two things (produce higher capacity batteries tthat much cheaper than they can right now, and create great cars that sell). If anything, Musk has not managed Tesla's finances very well to date.

I think anyone who invests in that stock -- as in buy and hold because they are buying this hype -- at that valuation is an idiot.

 

I get that. That is the battery factory Gigafactory a la P.T. Musk I was posting about -- and Morgan Stanley's crazy note.

That is just hype. First of all, he hasn't done anything yet. And he has consistently made all kinds of promises, missed deadlines and just racked up debt doing it. But even when he gets a factory built, the ridiculous valuation on the company is predicated on Tesla being able to do something that Panasonic hasn't been able to do on its own and somehow lower costs of those batteries by more than half. ... and at the same time not just bring down the cost of its cars, but create whole new markets that buy into it.

Good on them *IF* they can do that. But as something I read today put it, that Morgan Stanley rating was a "Utopia upgrade."

It is fantasy land at this point.

I just think anyone who buys the stock at this valuation based on that promise is an idiot. Think about it. The company was trading at a ridiculous valuation (while loaded with debt and losing money) three months ago WITHOUT it being an "energy" play. Now a few months later, you read a story that no, it isn't just a car company, but it is going to somehow transform the world's energy needs -- and that ridiculous valuation has become all-time crazy ridiculous.

What is going to be the new reason for the stock trading at $350 in four months, even as it is still a luxury EV maker loaded with debt that is making less than 35,000 cars a year?

 

The "mass produce lithium-ion batteries" is a new promise. What justified the valuation, then, half a year ago before the word "gigafactory" entered the lexicon?

I am curious. Are you personally putting your money behind that promise in a buy and hold way?

I would personally short it like mad if I had the money to sit tight with it. But I'm no Jim Chanos. I don't have endless pockets to watch a freight train keep speeding up out of control. A hyped up stock can reach speeds you wouldn't think possible, even if you can see a horrible crash coming.

Even if Musk does pull off a lithium-battery revolution of some sort, and that crash isn't inevitable, is all the good news already priced into the stock (and perhaps then some)? How exactly are you valuing that revolution -- other than on silly hype?