I Can’t Justify Tesla Motors Inc (TSLA)’s Valuation

Projecting that Tesla can maintain 25% gross profit margins begins to seem like financial suicide when you consider the investment power at the disposal of some of the big names in the auto industry. As Fool contributor Daniel Miller recently said, “Those who think that Tesla Motors Inc (NASDAQ:TSLA) is the future of the industry may be correct, but those same people often think that juggernauts like Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), and Toyota Motor Corporation (ADR) (NYSE:TM) will simply roll over and die — which I believe to be very foolish.”

And how can we be certain Tesla will reach an annual production rate of 500,000 vehicles someday in the future, anyway?

At today’s prices, Tesla stock is for speculators
Though I wouldn’t sell shares of Tesla if I already owned them, I definitely wouldn’t buy them today either. Sure, Tesla has a good chance of growing into a very large addressable market. But a significant portion of this opportunity is already priced into the stock. For now, I’ll watch on the sidelines, and it won’t bother me a bit if I miss out on big gains — the risk isn’t worth going for the home run.

The article I Can’t Justify Tesla Motors’ Valuation originally appeared on Fool.com is written by Daniel Sparks.

Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends General Motors and Tesla Motors and owns shares of Tesla Motors.

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