Tesla Motors (NASDAQ:TSLA) has surged almost 200 percent since its initial public offering price of $17 in 2010. Tesla’s visionary CEO Elon Musk has been touted by some as the “next Steve Jobs” and the company recently posted its first profitable quarter earlier this year. With that being said, the company has attracted its share of bears, as well. With relatively unproven profitability, but huge earnings potential, is Tesla an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s use relevant sections of our CHEAT SHEET framework to analyze the stock.
C = Catalysts for the Stock’s Movement
Tesla outperformed analyst expectations in the first quarter of 2013, reporting EPS of $0.12 and revenues of $562 million versus estimates at $0.04 and $499 million. Shares skyrocketed on this announcement, as well as news of an 83 percent increase in revenue from the previous quarter. Consumer Reports recently issued a rating of 99 for the Tesla model, 16 points higher than its chief competitor, the Porsche Panamera. Musk has projected that the third-generation Tesla Model S will be around 40 percent cheaper than the current model, which is priced at around $70,000, helping to attract a larger consumer-base and increase demand for the automobile.
Tesla’s distribution model is innovative, and apparently, in some states, illegal. Tesla has been battling auto dealers lately, as dealers have tried to pressure states into outlawing sales of Tesla vehicles. They argue that Tesla is in violation of existing state laws that prohibit auto manufacturers from acting as dealers. Tesla’s distribution model relies largely on consumers’ ability to order its vehicles online. Recently, Tesla won a temporary victory in New York, as the state government decided to shelve its decision of whether to ban Tesla sales; however, legislation in several states such as North Carolina and Texas is still pending.
A = A-level Management
Tesla CEO Elon Musk has a proven track record, co-founding the successful global e-commerce company PayPal. According to Glassdoor, 82 percent of employees approve of Musk as CEO. The entrepreneur has brought strong brand awareness to Tesla Motors with his celebrity-like media presence and his popular Twitter feed. The company has developed a devout following as evidenced by the popularity of the website.
Last week, Tesla recalled around 1,200 Model S cars for a defective mounting bracket. Musk’s handling of this recall was masterful — authoring the announcement himself on the company website. Owners of the recalled models were promised that their cars would be returned within and were all given a loaner vehicle for the time period. The recent Tesla recall contrasts sharply with other notable automotive recalls from the likes of GM (NYSE:GM) and Toyota (NYSE:TM) that resulted in public relations problems for the companies. Under Musk’s leadership, Tesla’s share price actually rose around 2 percent that same day.