TSLA Stock: This Should Keep Tesla Motors, Inc. Shareholders Up at Night

TSLA StockIs Tesla Stock All Hat And No Herd?

With Tesla Motors, Inc. (NASDAQ:TSLA), you can’t talk earnings because of the company’s ongoing development programs. The car business is an expensive one and production costs are going up, not the least of which is the interest expense on the company’s outstanding debt. Yet owners of TSLA stock have hardly noticed.

Car development aside, Tesla spent $261 million, so far, on its new battery-manufacturing “Gigafactory,” which is located outside of Reno, Nevada. Panasonic Corporation actually manufactures and supplies the company with all its lithium-ion battery cells.

It is highly likely that this new plant will cost a lot more than originally planned and take longer to bring online. The company was clear about this in its latest Securities and Exchange Commission (SEC) filings.

Tesla Motors’ CEO, Elon Musk, is not paid a cash salary, but he is granted stock options based on achieving certain performance measures, which include vehicle development. Another measure is based on incremental $4.0-billion increases to the TSLA stock market capitalization. The incentives are, therefore, grandiose.

So far, Tesla has delivered about 90,000 vehicles with the “Model X” SUV having launched in September of this year. The “Model 3,” which is expected to be a lower-priced, smaller sedan compared to the company’s original “Model S,” should be unveiled in the first quarter of 2016 with deliveries currently expected in late 2017.

Tesla’s Model 3 is the “make or break” vehicle for the company on a near-term basis. It’s the economies of scale product that can actually make the company worthy of its stock market capitalization.

Here’s the three-year chart for TSLA stock:

Tesla Motors Chart

Chart courtesy of www.StockCharts.com

Where Is Tesla Stock Going and How Will It Get There?

If there’s one thing that TSLA stock has going for itself, it’s a lot of goodwill on the part of investors.

There remains a tremendous amount of potential with this stock, but along with this comes a tremendous amount of hype, expectation, and investment risk.

Very near-term, I suspect the money has been made with this position. Now that development costs for vehicles and battery production are really accelerating, Tesla will soon be back to the market, issuing more debt and equity financing. The mass dilution of Tesla stock is something to be concerned about over the next few years.

Tesla needs cash and a low cost of capital, but the company has the product momentum and goodwill from investors to support operating losses and its stock market capitalization going into 2016. Short-term, vehicle development is the company’s success benchmark for investors. Medium- to long-term, Tesla’s secret weapon, as a business, isn’t in vehicle development at all; it’s in technology adoption.

Here’s the Bottom Line for Tesla Stock

Tesla Energy, the company’s battery division, just created a new generation of residential “Powerwall” energy storage products and “Powerpack” products for commercial and industrial applications. These, combined with powertrain manufacturing (the company is still selling to Daimler AG), are where the greatest potential for profitability for Tesla rests long-term.

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