Richly-Valued 'New' Tesla Lost One 'Old' Tesla Last Month (TSLA)
Tesla Motors (Nasdaq: TSLA) saw its worst monthly performance in October following a massive surge higher in the stock price during 2013 on strong investor sentiment for CEO Elon Musk and his crew.
Data shows that Tesla gave up about $4.1 billion of market cap last month, falling from a peak valuation of $23.5 billion down to around $19.4 billion by the end of October. That's the worst monthly loss since last February and the worst since December 2010.
To put the loss into better perspective, Tesla's market cap at the start of 2013 was around $4 billion.
Tesla's current trading range puts it with a tech company valuation of 262 times expected earnings. This is for an automaker which has a solid product, but pricing around $70,000 to $100,000 puts it out of reach for the vast majority of the population.
Coincidentally, Tesla also received some negative publicity last month on two accidents: One Model S fire in Washington earlier last month and another crash happening in Mexico on October 18th (though U.S. reports were delayed over a week following the incident).
Weighing on investors' minds in the potential for Tesla vehicles to look less appealing should certain regulatory matters pass. One in California -- arguably one of Tesla's prime markets -- involves cutting the amount of credits it received for the Model S by 40 percent in 2015. Other concerns might be import bans, Tesla's effort to implement direct sales versus dealerships, and increasing competition in the electric vehicle (EV) market.
There are some positives, too. Tesla's lithium-ion battery technology is robust and the company is forming or looking to form strong bonds with other automakers for supply agreements. One Daimler exec quipped earlier this week that he'd like to see his company do more work with Tesla. Tesla currently supplies Daimler batteries for certain Smart and Mercedes-Benz vehicles.
Last month, even Musk aired a little concern over the rapid rise in Tesla's stock price, which currently puts the company with a value that dwarfs that of Chrysler LLC owner Fiat S.p.A. Musk said,
The stock price that we have is more than we have any right to deserve ... It’s difficult to predict where it goes in the short to medium term, but I do feel good about having the company achieve that value and more in the long term.
The rapid gains have cut out short sellers. From record high short positions of 25 percent in September 2012, about 11 percent of float is currently out on loan. About 51 percent of Tesla's total shares available for shorting are also being borrowed by investors.
Tesla is slated to report quarterly results on November 5th. Current expectations call for the company to report adjusted EPS of 11 cents, which is in-line with consensus views. The company has been profitable on an adjusted basis over the last two quarters.
Shares of Tesla are up over 2 percent Friday.
* TBTF = Too Big To Fail, the phrase applied to most large financial institutions following the financial crisis of 2008 - 09.