To quote Oscar Levant: "There's a fine line between genius and insanity."
Elon Musk, CEO of Tesla Motors Inc (NASDAQ:TSLA) has done an exceptional job thus far of traversing both lines simultaneously while also helping to introduce revolutionary new concepts to better the world. A co-founder of PayPal, which has changed the face of Internet payment facilitation, and the developer of the first mass-produced electric vehicle, Musk is often viewed as a hero by the public and investors.
Source: pestoverde, Flickr.
On the flip side, some of Musk's ideas have bordered on eccentric. The ultimate goal of his aerospace company, SpaceX, to enable people to live on other planets, and his recent idea of a rapid mass-transit system known as the Hyperloop, are both a bit of a stretch. While the thought of a 35-minute trip between Los Angeles and San Francisco sounds intriguing, if you've ever watched California try to implement a transportation improvement project like I have you'd know that it's never finished on time, or even close to budget.
Yet in spite of Elon Musk's vivid and borderline wild imagination, it's Tesla Motors Inc (NASDAQ:TSLA)'s shareholders that are really the crazy ones. In an interview with CNBC last month, Musk, when asked about Tesla's growing valuation (which now stands at $20.6 billion by the way!) had this to say:
I actually think that the value of Tesla Motors Inc (NASDAQ:TSLA) right now is... the market's being very generous, and they're obviously giving us a lot of credit for future execution. So, we'll do our best to honor the faith that the market has placed in us. I really feel like the valuation we've gotten is... that we have right now... is more than we have any right to deserve, honestly. I think we need to make sure we really knock the ball out of the park in the coming years.
Musk wants to put people on other planets and tackle California's congestion issue – both daunting and veritably impossible tasks – but even he recognizes that Tesla Motors Inc (NASDAQ:TSLA)'s valuation makes little sense here.
Giving credit where credit is due
Let me be clear, as a current short-seller of Tesla Motors Inc (NASDAQ:TSLA), I in no way expect the company to fail, nor is the stock going back to single digits. I am a realist and understand that disruptive technologies do change the course of a sector over time. Tesla Motors has done an exceptional job of introducing a mass-produced car that has achieved an overall safety rating that's higher than any car ever tested. That's saying something!
In 2011, I projected that Tesla would never turn a profit and that prediction has turned out to be all wet. Tesla has successfully paid off its U.S. Department of Energy loan nine years early and has met its production targets in three straight quarters. Sometimes I do have to give credit where credit is due.
The insanity continues
Then again, some things never change.
For starters, Tesla's valuation based on its production capabilities has grown even further beyond the Gary Busey stage of ridiculous discussed last month and has traversed into something of Charlie Sheen-like state of existence. For a third straight month I give to you my own personal metric, the price-per-car tabulation, that I think succinctly demonstrates just how overvalued Tesla currently is:
|Company||Market Cap||2012 Production||Value per Car|
|General Motors Company (NYSE:GM)||$50.3 billion||9.288 million||$5,416|
|Ford Motor Company (NYSE:F)||$68.2 billion||5.708 million||$11,948|
|Toyota Motor Corporation (ADR) (NYSE:TM)||$199.1 billion||9.692 million||$20,543|
|Honda Motor Co Ltd (ADR) (NYSE:HMC)||$68.1 billion||3.137 million||$21,709|
Source: Individual company annual reports, Yahoo! Finance, author's calculations. * Projected 2013 production.