When one thinks of the companies outside the finance industry that received federal largesse under the stimulus package, one often thinks of failure, and for good reason. The failures of A123 Energy Solutions, now wholly owned by China’s Wanxiang Group, and Solyndra, among others, pretty much took care of that. But there have been successes as well.
Is there more room for Tesla to run?
The most spectacular success, and to me unexpected, has been that of Tesla Motors Inc (NASDAQ:TSLA). I am going to look at Tesla and some of its competitors today. Tesla has been on a historic run of late, its stock price zooming from about $35 a share in early April to $110 per share by late May. It has since settled in the upper $90s. What brought about this spike was a combination of first-quarter financials, along with superb product reviews and other product developments. The first quarter of this year was Tesla’s first profitable quarter in its 10-year history. Earnings came in at $11.4 million or 10 cents per share on a GAAP basis, and $15.4 million or $0.13 per share on a non-GAAP basis. Revenue growth was stunning, from $30 million in the first quarter of 2012 to $561 million in the just-completed quarter.
What has driven the revenues and resulting profits has been very well-received products. The auto business has always been product-driven, and a leading consumer magazine rated Tesla Motors Inc (NASDAQ:TSLA)’s new model S with the top grade it has ever awarded. The model S, which comes with a base price just south of $70,000 (not including any tax credits) and a 200-mile range, was also awarded as Motor Trend’s Car of the Year for 2013. With fanfare reminiscent of Lee lacocca in the 1980s using an oversized check to pay back Chrysler’s federal loans, Tesla CEO Elon Musk did much the same thing in paying back Tesla’s federal loans nearly 10 years ahead of schedule.
So all is good with Tesla Motors Inc (NASDAQ:TSLA), with management and products in place. But oh, that stock price. Even assuming tremendous intermediate growth of 50% in profits annually, it will be four years before its price-to-earnings ratio falls to 30, even if the stock price stays unchanged. This is a clear case of enthusiasm and emotion dominating rationality, and as much as I like Tesla as a company, I cannot see any way to endorse a purchase of Tesla stock.
Can Ford Motor Company (NYSE:F) solve Europe?
Tesla Motors Inc (NASDAQ:TSLA) is not the only profitable company with a strong environmental ethic. For 14 years, Ford Motor Company (NYSE:F) has been issuing annual sustainability reports. Under CEO Alan Mullaly’s leadership, the company has adopted a target of a 30% reduction of carbon emissions per vehicle manufactured by 2025. This is after dropping its carbon emissions by 37% per vehicle from 2000 to 2010. I know of no other old-line manufacturing company with that sort of ethic.