If Tesla Motors is in a hype bubble, when will its stock price deflate?

Normally on The Long Tail Pipe our focus is on education about the long ranging effects of the transportation system.  Get it?  Long Tail Pipe?  Anyway, there’s one company we cover a lot, Tesla Motors, where the story really is becoming the stock price and when/if TSLA shares will ever deflate and fall back to rational levels.  Yes, Tesla Motors has had a string of good news this year, and maybe they had a hand in engineering that good news.  The news about Tesla Motors is exciting, but does that warrant bidding the stock price up to a $20 billion market capitalization, or saying that Tesla is worth about 1/2 GM or Ford?  At this market cap, Tesla is worth twice Fiat.

That’s what I’m talking about … $40 a share to almost $170 a share, in under 6 months.  The people who bought in early on this have made a bundle.  (Google Finance)

Dunno if this stock price makes sense.  At the surface TSLA’s stock price seems irrational and that Tesla must be caught up in a hype bubble.  At this price, if the market were behaving rationally, the market is predicting Tesla will make huge huge gains in the automobile market and be fantastically successful.

The company has a huge set of challenges ahead of itself to do that.

Here’s some news coverage I’ve written over the last week about this:

DoubleLine Capital’s Jeffrey Gundlach said it wasn’t a good idea to short-sell TSLA even though the gains look irrationally excessive.  Specifically, he said he’s “scared to death” to short Tesla, calling it a cultish stock and he didn’t know which direction it was going.

Tesla’s rising stock price either hype or predicts car industry disruption.  Going over what Tesla would have to do to live up to investor expectations.  Their announced projections are that by the end of 2016 Tesla will be selling the Model S and Model X at the rate of 100,000 units a year.  That’s enormous, because this sales rate would totally swamp the luxury car market with electric cars.  In 2017 Tesla is due to begin manufacturing the high volume affordable price electric car, with a 200+ mile electric range and a $35,000 MSRP before tax breaks (if they still exist at that time).  That car is supposed to be at the 200,000+ car per year production level, at least.

With those kinds of production figures, maybe Tesla really will totally disrupt the car market.

Elon Musk: Our stock price is obviously far too high.  Yes, Elon Musk really did say recently that he thought Tesla’s stock price was too high.  But that was before saying that, at this stock price, the market has huge expectations of Tesla Motors, and that the company has to really knock it out of the park in order to live up to those expectations.

About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.

About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.

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