Tesla Motors (TSLA), possibly the most innovative and without question the most disruptive car company in America, was back in the news on Thursday, when the company finally announced the location – Nevada – of its colossal lithium battery “Gigafactory.” The Street was expecting the shoe to fall, and many analysts had suggested that Nevada was the front-runner. Even the announcement that Nevada was giving Tesla an incentive package worth $1.25 billion over time was in line with expectation. Still, TSLA stock rose on the announcement, briefly touching $290 per share, its all-time high.
What the market wasn't expecting was for Tesla's CEO, Elon Musk, to opine, in a question and answer session, that TSLA's share price was probably too high. Here is what he said: “I think our stock price is kind of high right now. 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.” Musk also said that when it came to TSLA's share price, investors have a tendency to “get carried away.”
This is Tesla we're talking about! This is the future of man, the un-blighting of life… surely Musk should be explaining his vision instead of deriding the stock… or not.
The truth is, Musk doesn't have to pump TSLA stock, and he doesn't really even need to explain his vision. Apparently, the market already shares that vision, because in its absence, the value of TSLA stock is ridiculous. To see an investment in TSLA today as being a smart move, one needs to take a very long ride into the future, over a great deal of still perilous terrain. It's too much to ask, unless one recognizes that the destination is inevitable.
The market doesn't usually attempt to be so visionary, and that makes the market's enthusiasm for TSLA surprising – even anomalous. This comes, mind you, from a now-and-forever TSLA bull. It seems like only last year (which it was) when I was recommending TSLA at $40 per share. As it happens, I still see the value in TSLA at its current price, but I'm a little surprised that so many other see it. Which others? Morgan Stanley (MS) says TSLA is going to $320; Stifel Nicolaus (SF) says $400.
Musk is happy to tell investors today that they are getting carried away, because he knows very well that the share price could rise or fall tremendously in the months and years before he successfully realizes his, and our, shared vision for the company. It's an important point: if you don't care for volatility, sell your TSLA shares today. That is what Musk's comments mean, and that is all they mean.
If you think Musk's comments indicate that he is becoming less sure of his vision, you've failed to grasp the only thing about Tesla that matters. Again.
Julian Close has been a business writer since the first day of the twenty-first century, having written for PRA International and the United Nations Department of Peacekeeping. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. He became a stockbroker in 1993, but now works for Fresh Brewed Media and uses his powers only for good. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.