Tesla Motors Inc (TSLA): Backlog-Zero?

Tesla Motors Inc (NASDAQ:TSLA) has been on a tear since the company’s CEO announced it would turn a profit in the first quarter. Going from spending on growth to making money is an important transition point in a company’s life. However, the decision to stop providing backlog data should concern investors.

The Turning Point

Prior to the first quarter, Tesla Motors Inc (NASDAQ:TSLA) offered investors nothing but red ink since its founding. That means buying shares was all about the chance of getting in on the ground floor of a future in which electric cars rule the road. Tesla Motors Inc (NASDAQ:TSLA) is a leveraged play on such a transition.

Very often a company turning its first profit is the first indication of long-term earnings growth. So, investors have justifiably been impressed with Tesla Motors Inc (NASDAQ:TSLA)’s first quarter. The shares have advanced over 170% so far this year, with most of the increase coming after the CEO’s earnings pre-announcement.

TSLA data by YCharts

Since the company still lost money over the trailing 12 months, however, it still hard to place a valuation on the company’s shares. In fact, the trailing twelve month loss is almost $2.70 a share, which makes the dime it earned in the first quarter look kind of small.

Even if the company earns $0.10 in each of the next three quarters, its recent price of around $90 would leave it with a P/E over 200. Ford Motor Company (NYSE:F)’s P/E is about 10 and General Motors Company (NYSE:GM)’s is about 9. Tesla Motors Inc (NASDAQ:TSLA) would need to earn over $4 a share to have a P/E of around 20. Clearly, Tesla Motors Inc (NASDAQ:TSLA) is being priced on emotion and not numbers right now.

Grey Clouds on that Silver Lining

Electric cars may be a great product, but they aren’t mainstream yet. Tesla has found a niche only on the high end. In fact, the company’s sedan was to be built in two versions–a luxury model costing nearly $100,000 and a lower cost model with less range. The lower cost model, which was still expensive at around $60,000, got dropped because of a lack of demand.

While there may be plenty of room for high-end cars to support profitability, the company needs to figure out how to make and sell lower priced models if it wants to survive over the long term. One key metric for the company and investors has been Tesla’s backlog, or the number of reservations it has. It just stopped reporting that number.

That means that investors no longer have any gauge of what sales are going to look like in future quarters. While the company suggests that such metrics have less meaning now that it is profitable, investors have to question the decision to stop reporting that number at this moment in time.

With such a swift advance on one quarter of good earnings, investors should be thinking about taking money off the table. The sudden choice to cut back on the amount of information being given to shareholders should seal the deal.

A Car Alternative

Ford is a better option in the automotive space. It was the only major car maker to survive the 2007 to 2009 recession without a government handout or a trip through bankruptcy. Not only is it more reasonably priced than Tesla, it offers a nearly 3% dividend yield (the quarterly dividend was recently doubled) and it has been profitable since the recession ended in 2009.

Although Ford’s shares are up over the last six months too, they are still bumping along at a relatively low level. That makes them appropriate for a turnaround investment. Moreover, Ford’s future is far more clear than Tesla’s, and it isn’t going to miss the electric switch if it ever takes place.

A Technology Alternative

Another option is to switch the technology you are looking at. For example, Clean Energy Fuels Corp (NASDAQ:CLNE) is at the forefront of an effort to move the United States from gasoline to increasingly abundant and low-priced natural gas. It switches vehicle engines from gasoline to natural gas and owns or supplies fuel to around 350 natural gas fueling stations.

The company is losing money and spending heavily on building out its infrastructure, but natural gas is already being used by fleet vehicles like buses and trash trucks. The next big push is to get the country’s truckers to switch over. Clean Energy Fuels Corp (NASDAQ:CLNE) has over 70 natural gas stations built on the interstate highway system ready to go, though only 10 are currently in operation.

If natural gas demand starts to heat up, Clean Energy shares will likely start a swift ascent.

Too Little Knowledge

Tesla’s move to limit the information it gives to investors should raise alarms. The timing is simply all wrong. And the price has risen too far too fast on one quarter of earnings. With no way to tell what the next quarter might look like, it’s probably time to get out or at least book profits. And it’s important to remember that Tesla isn’t the only way to play the vehicle market.

The article Is The Backlog Gone at Tesla? originally appeared on Fool.com.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Clean Energy Fuels, Ford, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Reuben 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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