Tesla Motors Inc (NASDAQ:TSLA)’s stock is valued as 22 times forward earnings, and the company just started making a profit in the previous quarter. Toyota Motor is the company to beat in this segment, with a market cap of nearly $200 billion, and a forward PE ratio of 15. Tesla Motors Inc (NASDAQ:TSLA) does have a lot of growth potential, but there is a lot of competition and billions of dollars at stake in the automotive market. I would wait until Tesla Motors Inc (NASDAQ:TSLA)’s valuation comes more inline with its business before pulling the trigger.
If this company is able to keep licensing out its technology to competitors, while producing cars with supply that cannot keep up with demand, Tesla will be a great investment going forward. However, its first-mover advantage may be be slipping away as the large automotive companies are researching their own technology and threaten to take Tesla Motors Inc (NASDAQ:TSLA)’s market share. General Motors Company (NYSE:GM) is rolling out its Cadillac ELR this year, which will compete against the same demographic as the Tesla Model S.
Haters be happy
Just the word electric car seems to bring out strong feelings for and against, with people arguing that the batteries are expensive, the cars look funny, and nobody wants them. One way to lower the price of a commodity is to lower demand. For gasoline, you can do this by either purchasing a non-gasoline powered vehicle, or encouraging your neighbors to purchase one.
As a person who does still own a vehicle with an exclusive internal combustion engine, I am stuck buying gasoline whether I like it or not. Owners of electric cars however, are slowly decreasing the demand for gasoline in this country, which should ultimately put downward pressure on the price of the commodity.
Foolish bottom line
As electric and natural-gas vehicles become a larger percentage of the American fleet, we should see continued demand decrease for the gasoline. Tesla has been able to: drum up some of the most loyal customers, license its technology to auto-majors, continually have demand outstrip supply, and maintain a “cool factor” with its cars. However, I will be waiting until this company comes down from the stratosphere and its fundamentals match up more closely to its stock price.
The article A Long-Term Bet Against Gasoline originally appeared on Fool.com and is written by Wes Patoka.
Wes Patoka has a position in Exelon. The Motley Fool recommends Exelon and Tesla Motors. The Motley Fool owns shares of Tesla Motors. Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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