Tesla Motors Inc (TSLA): Should Investors Buy Into the Bullish Sentiment?

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Versus competitors

Right now Tesla Motors Inc (NASDAQ:TSLA) is in a sweet spot. Tesla’s former competitor, Fisker, has gone bankrupt, leaving Tesla alone in the high-end electric car market.

Tesla GM Ford
Advantage
Market Cap $15 billion $50 billion $67 billion Ford
Price to Book 88 1.80 3.79 GM
Forward P/E 143 8.31 9.95 GM
EPS Next 5 Years 32.90% 15.93% 11.90% Tesla

Source: Finviz

Looking at the numbers, Ford Motor Company (NYSE:F) is the largest by market cap and General Motors Company (NYSE:GM) is the most fairly valued, but Tesla has the most growth.

Going by valuation metrics, Tesla Motors Inc (NASDAQ:TSLA)’s price is very rich. Tesla’s price to book ratio is over 20 times that of Ford and General Motors Company (NYSE:GM) while its forward price to earnings ratio is at least twelve times.  For a company that is only expected to produce 20,000 to 30,000 cars a year, having a market capitalization of 1/3rd the size of General Motors Company (NYSE:GM) is extraordinary. GM and Ford Motor Company (NYSE:F) have been around for over half a century. They sell millions of cars each year, have significant dealer relationships, customer loyalty, and a long list of patents. They have R&D budgets that dwarf the total amount of money Tesla Motors Inc (NASDAQ:TSLA) has ever spent. General Motors Company (NYSE:GM) alone spent $8 billion in research and development in 2012 while Tesla has raised less than $2 billion of total capital in its entire lifetime.

The great majority of Tesla’s market capitalization is due to Tesla Motors Inc (NASDAQ:TSLA)’s potential, and with the automotive industry size in the trillions and a fantastic product in the model S, it certainly does have a lot of that.

Conclusion

The future of Tesla is still uncertain. On one hand, the company is overvalued by every fundamental metric, and on the other hand, Tesla Motors Inc (NASDAQ:TSLA) has many intangibles that could make it the next Apple. The stock has shown incredible relative strength during the recent market correction and it seems as if Tesla will test 52 week highs again. Investors should be careful though, because like Tesla Motors Inc (NASDAQ:TSLA)’s prospects, Tesla’s stock is equally uncertain. It is better to stay on the sidelines and just enjoy the show.

The article Tesla: Should Investors Buy Into the Bullish Sentiment? originally appeared on Fool.com and is written by Jason Bond.

Jason Bond has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors Inc (NASDAQ:TSLA). The Motley Fool owns shares of Ford Motor Company (NYSE:F) and Tesla Motors Inc (NASDAQ:TSLA). Jason 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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