This is the season when we celebrate great financiers like Warren Buffett.
But you don’t invest in the past. You invest in the future.
Maybe we should be celebrating Elon Musk instead.
The Fool’s Jason Hall calls what is happening with Musk’s stock “a bubble,” and on an absolute valuation basis, he’s right. But if you got in on Google Inc (NASDAQ:GOOG) when it started, you’re more than happy now. If you got in on Amazon.com, Inc. (NASDAQ:AMZN) during the 1990s, you’re also whole.
Musk founded a “web platform for publishers” called Zip2 back in the 1990s, selling it to Compaq for $305 million at the height of the dot-com bubble, netting himself a reported $22 million. Then he launched a payment outfit called PayPal, selling it to eBay Inc (NASDAQ:EBAY) for $1.5 billion in 2002 and netting himself another $160 million.
But he told VentureBeat he was broke in 2010, mainly because he kept plowing his money into new ventures.
Tesla Motors Inc (NASDAQ:TSLA) was blamed by Musk for his own troubles back in 2010, and it’s nothing if not audacious.
The idea of building a new car company from scratch has been around for generations, and the road is littered with those who tried and failed. This is also true in the area of electric cars, where such companies as Coda and Fiskar have tried, and failed, often spectacularly. It’s become a political issue, with The Motley Fool’s John Rosevear asking in April, “Has Obama’s Electric Car Revolution Failed?” Not Fiskar’s, not Coda’s, not even Musk’s. Obama’s.
What separates Tesla Motors Inc (NASDAQ:TSLA) from the rest is Musk’s insistence on an all-robotic assembly process, on high-end styling ahead of mass production, and its apparent profitability. The company nearly broke even in its most recent quarter, and now looks poised to go into the black ahead of schedule. It has been steadily reducing debt and is now cash flow positive.
The company sold more cars, over 4,700, within its price range during the first quarter than Mercedes, BMW or Audi, and is now planning to repay its government loans with a new offering of equity. Skepticism, and the company’s performance in the face of it, have led shareholders on a wild ride upward, now up to nearly $85, and Musk himself is putting another $100 million to work in it.
Tesla Motors Inc (NASDAQ:TSLA) is the first company to succeed in the electric car market, and it may be the last new entrant there. But it has a solid niche in the luxury end of the market and a functioning business model, which is ready to move into the higher-volume middle of the market. As battery technology continues to improve, Tesla Motors Inc (NASDAQ:TSLA)’s future looks bright.