HIT THE BRAKES

Elon Musk’s warning about Tesla is being ignored

“I think our stock price is kind of high right now,” Elon Musk said last week. “If you care about the long term, Tesla, I think the stock is a good price. If you look at the short term, it is less clear.”

That was Friday. Since then, after some knee jerk selling on the afternoon of the comments, Tesla Motors share price has proceeded to climb higher. It is not far away from record levels again today.

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Shares in the electric carmaker are up nearly 90% in 2014, and a staggering 1,355% since the company’s 2010 IPO. And the thing is, most of Wall Street thinks they can go much higher. As we have chronicled over the past few months, the bluest of blue-chip names on Wall Street are pretty optimistic about the company.

Morgan Stanley thinks it is much more than just an automaker, and could be making $2 billion a year—about as much as it currently makes from cars—by the end of the decade from energy storage. Goldman Sachs thinks Musk is the new Steve Jobs or Henry Ford. And so on, and so forth.

(A cynic might say investment banks are positioning themselves to win business from the company for future corporate activity, say, on a capital raising or acquisition. But that kind of behavior has been illegal for more than a decade, and Tesla just raised $1.6 billion fresh capital earlier this year.)

Ever since its IPO, there has been an intense debate raging about Tesla’s valuation. Most companies are valued on their earnings, and Tesla doesn’t really have any at the moment (it lost $62 million last quarter) so this is a debate that is impossible to resolve and we won’t delve into it. After driving one myself, I am convinced Tesla has a bright future, and would not at all be surprised if the company plays a huge role in the future of the global automobile industry, not to mention energy storage and whatever else.

But if even Musk himself is worried that the market is getting ahead of itself, maybe its time for investors to tap the brakes a little bit?

 

 

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