Tesla - A Stock for Fearless Investors

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Tesla Motors (NASDAQ:TSLA) takes a beating in the media on a continual basis, but I LVE this company. Elon Musk is a creative visionary who doesn’t just dream about what could be done. He gets it done. Getting it done requires more than vision and technical expertise. It also requires extraordinary business acumen. Musk has it all, and he has infused it all into his companies, like Tesla and SpaceX.


Every time that Tesla stock declines it seems like there are “experts” who feel compelled to forecast the company’s demise. I am just happy that these pusilanimous pessimists don’t forecast the weather. They would predict the end of the world if there were storm clouds on the horizon.

Tesla’s share price fell 8.9% to $239.00 in one day just a week ago after releasing its second quarter results which report another quarterly and year-to-date loss ($184.2 million and $338.4 million, respectively). It continued its decline through 11 August when it bottomed at 237.37, but has turned around on the 12th and 13th, continuing to get more robust in after hour and early-morning trading today.

Tesla closed yesterday at 242.51, opened this morning at 247.24 and climbed at high as 247.93. Currently (11:00 a.m. EDT), TSLA is trading at 244.41 as investors (and even some of the media) have been responding favorably to the company’s announcement that it will be sell about 2.69 million shares at an offering price of $242.00 per share, expecting to raise $625 million.

Typical of any disruptive, high-tech manufacturing company with expensive products, there is a lot of cash burn during the initial phases of development. This is especially true with companies like Tesla where more cash is necessary for the development, not only of new technology, but of the infrastructure to support it and commercialize it. For Tesla, that infrastructure funding is needed to build the company’s mega-factory near Reno, Nevada, and to establish a country-wide network of charging stations – in every country in which the company sells its cars.

Ever confident in the ultimate success of his mission, Mr. Musk has already indicated that he, himself, will invest $20 million to acquire more shares in the offering, no doubt to not only to demonstrate his confidence by increasing his financial stake in the company, but also to avoid dilution of his existing shares.

Finally, there is a need to put some perspective on Tesla’s financials. For all practical purposes, Tesla still needs to be regarded as a startup company even though it is well on its way to accomplishing its goals. What I am saying is that investors must understand going in that there is going to be a period of sustained operating losses. Whilst an entrenched company sustaining losses on increased income is a concern, a startup is different. It needs to demonstrate increased revenues that prove the business model and its commercial viability.

To that point, Tesla’s quarterly revenue increased by nearly $190 million to $955 million. It’s half-year revenue rose from $1.4 billion to $1.9 billion year-on-year.

As for Tesla’s share price, if you hear that it has tumbled, check its history. Just over two years ago, on 8 April 2013, TSLA shares traded at 43.75, over 100 points less than today. Just over a year later, on 22 May 2014, TSLA shares closed at 204.88 and have closed below 200.00 only 19 days since.

When considering Tesla, look at the historical performance, make sure you are in it for the long-haul, and be sure you have caught at least a glimpse of the vision is almost certain to become a reality – and one that has great rewards for those who invested in time.

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