During my senior year of college, I had the opportunity to fly from Cleveland to New York in order to interview with the equity research department at JPMorgan Chase.
My good fortune started with sending an e-mail to a high-powered alumnus who received his MBA at Case Western Reserve and had risen to become a Managing Director at one of Wall Street’s most prestigious banks.
Before continuing the story, I should first mention that my undergraduate advisor who is the current Assistant Dean at CWRU’s business school advised me not to contact this alumnus because he felt the person had become too senior within the J.P. Morgan organization. After a brief deliberation, I looked past my advisor and confidently clicked the “send” button in my Gmail.
A short time later, I found myself sitting across the table from the influential J.P. Morgan exec whom my advisor considered to be unreachable. We met at a small, tucked-in restaurant within a whisper of JPMorgan’s headquarters at 383 Madison Avenue, the former location of Bear Stearns.
At the time of our meeting, Tesla Motors Inc (NASDAQ:TSLA) was an unproven entrepreneurial venture backed by a $450 million loan from the Department of Energy. Shares traded in the $19 to $20 range, a discounted valuation which reflected the uncertainty in the electric car business given the failure at Fisker Automotive and many others.
Fast forward to present date, and Tesla Motors Inc (NASDAQ:TSLA) is trading upwards of $90 per share, preparing to repay its DoE loan, and perhaps even disrupting the traditional auto industry.
While I can’t predict what Vivek Aalok or I will do next, here are six reasons why I believe Tesla Motors is shaping up to be the next Apple Inc. (AAPL) or Google Inc (GOOG):
- Tesla Motors’ four passenger sedan Model S became an overnight sensation as the best-selling luxury car during Q1 2013 with approx. 4,750 units sold, handily outpacing the 3,077 units for Mercedes-Benz’s S-Class by more than 50%. The Tesla Model S lists at $62,400 or $72,400 with 60 kWh and 85 kWh battery packs respectively.
- The company has demonstrated initial success in the luxury high-end market with Model S and is preparing to widen its appeal with a luxury SUV (Model X) and a lower-priced model for the high volume middle-class market.
- On May 15, Tesla Motors announced a common stock offering of 2.7 million shares and $450 million of senior convertible notes. [Author’s Note: Equity increased to 3.4 million shares due to high demand, priced at $92.24 per share. Debt increased to $600 million]. The company is planning to use proceeds for repayment of the Department of Energy’s loan in full with interest.
- Anyone who is familiar with Tesla cofounder Elon Musk is aware that it isn’t wise to bet against this man. The 41-year-old chairman and CEO is a Wharton School graduate and founded PayPal before selling out to eBay Inc (NASDAQ:EBAY) in 2002 for $1.5 billion, collecting more than $160 million himself in the process. Furthermore, Musk plans to purchase $100 million of Tesla’s new common stock, a clear vote of confidence in Tesla Motors Inc (NASDAQ:TSLA)’s surging share price.
- As of the most recent Nasdaq settlement, a massive 37.5% of Tesla shares are borrowed by short sellers that are betting the stock will go down. Short interest has fallen from a previous 45% and I believe it will continue to fall as sentiment begins to change.
- Wall Street is optimistic on Tesla Motors Inc (NASDAQ:TSLA) following the company’s highly successful capital raise with respect to improved financial health, company reputation, and growth opportunities. Analysts at Morgan Stanley raised their price target to $109 from a previous $103 and reiterated a “buy” rating. Barclays Capital believes the stock can reach up to $137.
