Saturday, August 28, 2010

Request Weekend - Part II - takes us to startup Tesla Motors in California which just went public in late June 2010

Dow Jones 10,151  (Down)  Week ending August 27th

Tesla Roadster
Well what a perfect way to end the summer
to put the top down and talk about and take a cruise in the Tesla Roadster the Electric Beauty to the right.
   To be honest when I got this request I was thinking in my head "Delorean, they'll be out of business in a year" but as I started doing my investigation I discovered reasons that I think they will ultimately be successful.

 TESLA MOTORS, INC (Symbol TSLA, $19.70) stock debuted at $17.00 and the low so far on the stock has been $14.98 and the high $30.42 . The stock had it first quarterly report and like most start ups it recorded a loss in it's first quarterly report of $5.08 per share. They have a profitable business model but just needed to bring sales up to a point where they cover their high SGA and Research and development expenses. You almost have to think about these guys like they are a bio-tech stock trying to find the cure for cancer, except they are trying to find the cure for our dependence on foreign oil. It takes time and money to get going, so keep an eye on cash-burn.

     Why will they be successful? People are fed up. They are angry about the oil environmental disaster in the Gulf of Mexico. They are sick and tired of being held hostage by the oil companies from foreign countries and having to pay ever increasing prices. You push people hard enough and they dig their heels in to fight back. If you drive one of these vehicles 15 years you save over $20,000 in gas and oil cost , around $1300 per year at current prices.

       Some other reasons, there are a lot of mutual funds looking for "green" investments like this and are willing to hold this type of investment for the long term. Also it appears that they have a lower cost Model S version (pictured left) to get their pricing down a bit.  Also don't forget that all the cool new stuff starts in California and then heads east, like the personal computerJimmy Hendrix, The Grateful Dead and The Beach Boys. 

Tony Helmholdt inventor of twin powered
Electric motorcycle 
I also found an article about a 23-year-old named Tony Helmholdt who works for Tesla Motors in Chicago.  About 25 or 30 Chicago area drivers own Teslas, and Helmholdt is helping owners maintain their $100,000 sports cars. But more importantly he has invented and built a a twin-powered electric motorcycle. Now there would be something with a mass market appeal that would give Tesla the cash flow to sustain their car line until sales ramp up. I have no idea if or when Tesla would produce this item. What is certainly clear is that all this electric stuff is coming soon so get used to it.

On purchasing the stock, I would would wait until October 2010 since the earnings report is already out and a lot of the newbies that bought it on the public offering will get impatient and probably dump it. I would look to buy it as a 3 year long term investment in the price range of  $15 - 17 per share range, which I think you will see again. This is, be warned, a High-Risk Investment.

So honk a horn, so I hear you coming and take a cruise in a Tesla Roadster!
Joe, you should test drive a Roadster on that road that goes between San Mateo and Half Moon Bay. While you are in San Mateo stop in at Nick's Deli if it is still there. Try the Chicken salad sandwich.


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