Monday, March 24, 2014

Tesla Is Getting Bigger and Better

This article was originally published by GuruFocus

By Sarfaraz A. Khan, Research assistant: Gohar Yousuf

March 24, 2014
Tesla Motor
(TSLA) is planning to construct the world’s largest battery factory. The company could produce more lithium ion batteries in a year than the total amount of batteries that were produced, around the world, in 2013. Moreover, the company could bring down the lithium ion battery costs by at least 30%, which could give a significant boost to its earnings.

The news was welcomed by investors and Tesla’s shares, which were already trading at lofty valuation levels, went even higher. In my previous article for GuruFocus, I mentioned that Tesla is laying foundations for solid growth in the coming years and therefore investors should not sell their Tesla shares. Since then, the company’s shares have been up more than 50% and are currently trading 63 times its 2015 earnings estimates, as per data compiled by Thomson Reuters. This is expensive even for a technology stock.

Tesla, however, is a disruptive technology stock. Therefore, its stock will likely continue to trade at extraordinary multiples of earnings; like 3D Systems (DDD), or the fuel cell makers such as Ballard Power (BLDP) or Plug Power (PLUG), or Amazon (AMZN).

The company’s recent quarterly results have shown that Tesla is heading in the right direction. The company has significantly reduced its losses while its revenues have more than doubled. In short, Tesla is getting bigger and better and as a result, its shares could continue going higher. … read full article at GuruFocus