Tesla Motors Inc (TSLA): Are Electric Vehicles the Next Big Thing?

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Electric vehicles and Tesla are undoubtedly riding a wave of success. Even better, electric vehicles could begin to gain mass market acceptance as early as three to five years from now.

Can you invest in this opportunity?
The question isn’t about survival anymore. Electric vehicles will play a big role in the next decade. But it is in this obvious opportunity that there also lies several problems for investors.

First, electric vehicles represent a very small portion of total sales for the big auto companies like Ford and General Motors Company (NYSE:GM).

Second, if electric vehicles gain mass acceptance, big automobile manufacturers that manage to capture electric-vehicle demand may offset these gains with declines in sales of its traditional vehicles.

Finally, Tesla Motors Inc (NASDAQ:TSLA), arguably the only publicly traded company solely reliant on electric vehicle technology that is also financially stable, has massive growth already priced into the stock. At 15 times sales, compared with Ford Motor Company (NYSE:F) at just about 0.5 times sales, opportunity is undoubtedly priced into Tesla’s stock — especially after the stock appreciated about 275% year to date.

What does all this mean for investors? The latest growth trend or fad isn’t always a great investment opportunity. Valuation matters.

Does this mean it’s time to sell Tesla? Not necessarily. But when the opportunity is already obvious, it may be too late to buy.

The article Are Electric Vehicles the Next Big Thing? originally appeared on Fool.com and is written by Daniel Sparks.

Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors Company (NYSE:GM), and Tesla Motors and owns shares of Ford and Tesla Motors.

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