Tesla Motors (TSLA) is up a staggering 425% in 2013, but Tesla stock has only shown signs of accelerating — not slowing down.
Sure, TSLA is pushing a forward P/E of 100 and is valued at more than $20 billion despite production forecasts of just 21,000 Tesla Model S vehicles for this year. But when you look at a chart, it’s hard to argue that the direction is anywhere but north.
I mean, the Tesla Model S got the highest-ever rating from Consumer Reports for a vehicle and a top safety rating from government regulators … all while throwing off big margins that make TSLA profitable despite its relatively low sales volume.
Couple this do-no-wrong run for TSLA with ambitious plans from Tesla’s founder, Elon Musk, that include self-driving cars and a “hyperloop” public transportation scheme to shoot Americans around the nation in tiny capsules … and it certainly sounds like Tesla stock is shaping up to be the new iconic investment of the age.
The TSLA mystique is so strong that founder and CEO Musk is almost a caricature of modern technology and business acumen. Consider the Tesla stock exec is such a cultural force that there’s now a hilarious “bored Elon Musk” Twitter account that parodies his ingenuity by sharing hilarious high tech ideas like a zamboni rickshaw or nanobot undergarments that itch themselves.
In short, Tesla is the new Apple (AAPL). And Elon Musk is the new Steve Jobs.
And perfect timing, too, since Apple stock continues to drift sideways thanks to top-line headwinds and a general sense that innovation is dead at the California tech giant. After all, the best AAPL has been able to do is yet another iPhone refresh (with a fancy fingerprint sensor, but little more) and a not-so-bargain version of the iconic smartphone.
Meanwhile, TSLA has upended the entire auto industry with innovative batteries coupled with slick designs and a disruptive direct-sales model that doesn’t play by the same rules as dealers for General Motors (GM), Ford (F), Honda (HMC) or Toyota (TM).
TSLA Won’t Go Up Forever
Tesla stock clearly wins the crown as Wall Street’s top investment, and TSLA is winning accolades from consumers and industry analysts alike thanks to its innovation.
But if we learned anything from Apple stock, it’s that the darlings of the tech world can fall from grace just as fast.
Maybe Tesla stock will hit a wall as an automaker like Ford or GM brings a similarly successful vehicle to market; General Motors seems a likely candidate with its Volt and continued research into better batteries that will give the Tesla Model S a run for its money.
Maybe the Tesla Model S will never be more than a niche product, and TSLA founder Elon Musk will fall into the hubris of overexpanding and overestimating demand in the years ahead.
Or heck, maybe TSLA keeps on keeping on as a company but Wall Street suddenly decides a forward P/E of 50 is more appropriate — and shares tumble by half as a result of sentiment, not fundamentals.
Either way, it will be a wild ride. That’s the unfortunate burden that comes with being an iconic and innovative stock like TSLA.
But given the choice between investing in a red-hot stock like Tesla or a faded star like Apple, it’s no wonder that many investors pick the former over the latter.
Related Reading on TSLA
- GM continues to chase Tesla in battery design. (USA Today)
- The Tesla Model S won the highest-ever rating from Consumer Reports. (Grist)
- TSLA is safe as well as sexy. (The Slant)
- Can Tesla stock enjoy double its sales by the end of next year? (Forbes)
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.