Tesla (TSLA) is a high-tech marvel, a company as ambitious as it is innovative. TSLA stock debuted on the hopes of Tesla mass-producing electric vehicles in an age where EVs weren’t popular and where nearly every start-ups in California was focused on software instead of sedans.
But CEO Elon Musk and Tesla have proven themselves. TSLA stock is up by more than 1,000% from its 2010 IPO, and the electric vehicle manufacturer is profitable and looking to expand both geographically and across new models. In addition to the current Tesla Model S, the company is launching a Model X SUV this year and toying with an entry-level Model E mid-sized vehicle that could be ready for production next year.
The incumbent automakers are racing to catch up now that EV sales have been proven by Tesla. General Motors (GM) has revisited its Volt and is pushing a smaller and cheaper EV in the Spark. Ford (F) has its Fusion Energi and C-MAX electric vehicles, Honda (HMC) has a plug-in Accord and Toyota (TM) has a plug-in Prius.
But if you’re only watching auto sales and new model debuts, you might be missing the biggest area of potential that TSLA stock has.
Namely, its batteries.
Tesla is about to unveil details on its “gigafactory,” a massive battery manufacturing facility that is rumored to be a partnership with Panasonic (PC) or Samsung (SSNLF) to research and produce cutting-edge batteries for the 21st century.
“One thing is sure: Tesla hopes to reinvent battery production like it already did to other parts of the auto supply chain,” analysts at Baird said recently regarding gigafactory news.
Now, Tesla is not without risk in this venture. Estimates for the so-called gigafactory are between $7 billion to $10 billion, according to Wall Street projections. That’s a big build-out and will obviously take time to deliver profits back to shareholders of TSLA stock.
However, a partnership could lower those costs and mitigate risk. And more importantly, Tesla has proven it’s not afraid to strike out into new territory.
Model S sales are up, Tesla has momentum and an ambitious effort like this is exactly the kind of innovation investors have come to expect from TSLA and its iconic leader Elon Musk.
Stay tuned for the details on the gigafactory. And if you own Tesla stock already, hang on for what is sure to be a wild ride.
Personally, I’m reluctant to buy into TSLA right now at sky-high valuations. The forward price-to-earnings is about 60 and the company has soared 500% in a year, which makes me fearful of buying at a top.
However, this high-flier hasn’t shown signs of slowing down. So there’s no reason to think that you can’t buy Tesla high and sell higher.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP.