Tesla Motors (TSLA) refuses to slow down. After an amazing 620% run in the last 12 months for TSLA stock, shares are set to pop again Tuesday as Tesla announced it is expanding into Europe big-time in 2014.
The plan includes more high-speed Superchargers — stations that charge Tesla vehicles quickly and free of charge — as well as building more service centers and stores on the continent. TSLA stock jumped 3% in early trading as a result of the news.
“By the end of this year, we expect you will be able to travel almost anywhere in Europe using only Superchargers,” CEO Elon Musk said in a statement.
The plan is certainly ambitious … but is it enough to keep TSLA stock running?
TSLA Not Slowing Down
Tesla has been on a tear lately, for a host of reasons. In mid-February it was an earnings beat and increased production for its flagship Tesla Model S sedan. Then a week or so ago, it was plans for a “Gigafactory” that juiced TSLA stock.
Shares are up 66% so far since Jan. 1 thanks to this spate of recent news.
The million-dollar question, of course, is whether Tesla can keep this up after its massive run-up across 2013.
The bears point not just to the rich valuation for Tesla stock, with a forward price-to-earnings ratio of about 65 right now, but practical concerns about a bottleneck in production. For instance, the Tesla Model X SUV has been delayed thanks to issues with battery supplies, meaning the new vehicle won’t launch until 2015 instead of this year.
Furthermore, there’s some trading issues facing TSLA stock — including the fact that more than one-third of shares are still held short even after the big gap up, hinting bears aren’t giving up. And while Tesla offered convertible debt a week or so ago to robust demand, raising $2 billion in capital, the fact that these bonds will become stock eventually and dilute existing shareholders is noteworthy after a big secondary offering less than a year ago.
The bulls insist that these impediments aren’t enough to slow down Tesla and that the electric vehicle company will continue to dominate.
Time will tell. TSLA expects a growing part of its business to come from outside the U.S., via not just European sales but also the world’s biggest auto market in China.
Furthermore, the success of Tesla has driven competitors to take electric vehicle sales seriously. The Prius plug-in from Toyota (TM), the Fusion Energi and C-MAX vehicles from Ford (F) and the Chevy Volt and Spark from General Motors (GM) all look to carve out a piece of the pie in this fast-growing car category.
It also remains to be seen whether this growth, even if it materializes, will be enough to satisfy investors who have bid up the stock to a level that requires near-perfect execution.
But one thing is for certain … betting against TSLA stock is a dangerous game, and plenty of bears have been burned over the last year or two by this stock’s massive run-up.
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.