Tesla Motors – a Rapid Growth, or a Future Decline?

Tesla Motors made its initial public offering in July, 2003, while it was led by Margin Eberhard and Marc Tarpenning, who were also one of the most important investors in the first series of funding. It is one of the most popular companies in the renewable energy sector, named after the all-famous physicist Nikola Tesla. The main product of the company, the Tesla Roadster, is one of the biggest innovations in the electrical automotive industry, using the AC motor, which is based on an original design from Tesla himself. The roadster, which is also the vehicle with which the company entered the market, was the first to use lithium-ion cells for its engine and broke all records in the sphere, going over than 320 km for a single charge. Released in 2008, by 2012 Tesla Motors sold nearly 2200 roadsters, reaching a wide wave of interest in a whole of thirty one countries. 

Tesla’s corporate strategy and mission is to make electronic products in the automotive sector more deluxe, targeting the high-end environments in the automotive consumer market. However, the success of the company made it possible for it to expand and today it is operating in a much larger environment, competing with the most successful automobile manufacturers in the world.

Today TSL stock is trading for $177, which even though is a decline for the last several days, is a much higher price than the $80 per share it was selling in June, 2013. General expectations are that it will continue to increase in value during the next several weeks and most analysts are forecasting twelve month future prices to have an average target of $220, somewhat consistent with the company’s actual target. The highest estimate is $325 and the lowest $75, which shows the large degree of uncertainty that this stock is perceived to have. Nevertheless, the average estimate represents a 23.75% increase for May, 2015. Because of this degree of risk the consensus amongst investment analysis is to hold Tesla Motors Inc. stock, and the advice to potential investors is to wait until it shows signs of stabilizing its growth rate the way it did around the same time last year. Expectations are that it won’t fall below the 2013 initial benchmark, yet there is around a 25% chance that it can plummet to a much lower figure than the current one, especially with its negative EPS ratio of -$1.11.

Furthermore, the TSL stock quote fell by 11%, below any types of expectations both by external and internal estimates after the first quarter report. Nevertheless, the company reported $713 million revenues, which is an increase than the estimate of $699 million and increased its general profit margin. Many think that the decrease is because of the unimaginable fast rates of growth that the company is aiming for, stepping rapidly in new markets. Its most recent venture was in China and even though results are promising, investors are afraid of overinvestment. The stock went up by 227% for the last twelve months, which boosted the company value to be almost half of the value of General Motors – the second largest automotive company in the world. It seems like investors have decided that buying too much of the stock will eventually result in a bubble when the funds start to dry and decided to step away. However, this action by itself seems to have self-full filed their expectations, but even the stock goes down by the lowest threshold it will still be more valuable than it was in the previous quarter.