Tesla Motors Inc (TSLA) – Jump in for a Ride to the Top?

All of this sounds good for Tesla Motors Inc (NASDAQ:TSLA). Its competitors include the Chevy Volt and Nissan Leaf . It appears Tesla’s offering is outperforming these other electric vehicles. Even though General Motors Company (NYSE:GM) and Nissan have massive resources, they cant keep up with Tesla in this niche. General Motors Company (NYSE:GM) has $24 billion in cash and billions more coming in annually.  Nissan also has massive amounts of cash ($10 billion) and about $5 billion in net income annually.  Both of these vehicles underperformed versus market expectations. Challenges to broader electric vehicle adoption likely played a role. Tesla Motors Inc (NASDAQ:TSLA)’s higher end offering seems to have helped it. Other competitors in the sector went bankrupt like Coda Holdings, Fisker, Think Car and others.

Conclusion

Being the best and only significant pure play electric vehicle manufacturer that is traded shows that Tesla has accomplished a lot so far. It is trading at just under 100x FY14 EPS. There is no other auto or manufacturing company that comes to mind to compare it to for valuation purposes. A DCF with the terminal value coming from the Gordon Growth method is probably the best approach to valuing Tesla Motors Inc (NASDAQ:TSLA). That said, the cash flows are not easy to determine. Factors that can drive the shares higher are improving industry fundamentals, beats versus consensus from earnings, and order activity.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool recommends General Motors Company (NYSE:GM). Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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