Why TSLA Stock Could Surge
Despite its raging popularity, Tesla Motors Inc (NASDAQ:TSLA) is still underappreciated. Bearish investors don’t realize that TSLA stock is so much more than a car company; it’s an end-to-end energy company.
Unfortunately, that ignorance comes at a steep price. Tesla stock has grown 1,066% since its introduction onto the NASDAQ stock exchange, meaning that those bearish investors have cost themselves a lot of money. A lot of money.
But it’s okay. According to Elon Musk’s “Master Plan, Part Deux,” TSLA stock still has a ton of unexplored upside potential. (Source: “Master Plan, Part Deux,” Tesla Motors Inc, July 20, 2016.)
There is a “secret ingredient” that ensures continued success, and it has nothing to do with the reasons you normally hear. It’s not the driverless technology, nor the impending acquisition of SolarCity Corp (NASDAQ:SCTY).
Both those tailwinds can buffet Tesla stock to a higher price, but they are not the “secret ingredient” I’m talking about. Just read the recent master plan more closely. It’s all there, hiding in plain sight, but investors are too tunnel-visioned to see it.
They have drawn definitive lines around TSLA stock as an emerging carmaker. As a result, the only valuation they’re capable of is that of an emerging carmaker. It’s not rocket science; just good ol’ fashioned logic.
Sure, it has a higher price-to-earnings multiple than other car companies, but that’s not because of my “secret ingredient.” Investors are simply bullish on Elon Musk’s chances of scaling up Tesla. They have finally accepted that he can do it.
That being said, they’re missing the broader value in this company. Tesla’s true brilliance comes from how it approaches problems, not how it makes cars.
For instance, when Musk decided to build Tesla, he faced a serious obstacle: no one had ever built a cheap, successful, and popular electric car before. So he decided to start with an expensive car first, then work his way down the price ladder.
Believe it or not, that is innovation. Past developers had thought: “Hey, let’s build an electric car, but it doesn’t matter what it looks like. Just make sure it’s cheap.”
Musk thought: “Why don’t we just build a really good luxury car that people will pay lots of money for? Then we can use that money to build cheaper cars.”
He changed the nature of business by questioning what everyone else took for granted. That’s why TSLA stock’s chart looks like this:
Chart courtesy of Stockcharts.com
Now he’s doing that again. If you look at the four major points in the “Master Plan, Part Deux,” it becomes obvious how high Tesla stock could truly soar. Here they are:
- Build solar roofs with battery storage,
- Build electric vehicles in all major categories, including trucks and buses,
- Make self-driving technology 10 times safer than human drivers, and
- Have your car make money for you.
Once again, Elon Musk has changed the game. While solar energy companies want to install solar panels on your roof, he wants to sell you a roof that is a solar panel.
Tesla is literally integrating solar panels into roofs that it will sell and install for customers. It is a strikingly brilliant idea that could serve as a tipping point for solar power adoption. Oh, and it would send TSLA stock soaring too. But that’s not all.
After you’ve collected that energy, Musk wants you to be able to charge your car, whether it’s a sedan, SUV, or pickup truck. Tesla plans on building every type of terrestrial transport in an electric form, but its fundamental appeal is different.
Elon Musk points out that our cars lie in wait for most of the time that we own them. When you’re at work, your car is just sitting in a parking lot. When you’re sleeping, it’s just parked in a garage. But if it’s capable of driving itself, then why not let it drive around and make money while you’re busy?
If that idea sounds ridiculous, it’s because no one thought of it before, and that’s what makes it brilliant. Being able to do that could dramatically reduce the cost of owning a car. It’s like Airbnb. When you’re not at your cottage, rent it out to help pay the mortgage.
The “secret ingredient” to TSLA stock is that Tesla rethinks a business from the bottom up. Its approach is always unique and different. In other words, Elon Musk has bottled genius, packaged it into a company, and offered it to investors in the form of Tesla stock.