Every so often a stock with a good story catches the eyes of traders and experiences a price spike in response. Tesla Motors (TSLA) is currently that stock. Since the end of April, shares of Tesla have approximately doubled in price, soaring from $53.99 on April 30, 2013, to $104.95 today. When hoopla such as this occurs, it is easy to forget that good stories do not always result in good investments.
Tesla certainly has a lot going for it right now. The high-end electric car company delivered better-than-forecast first-quarter results earlier this month. The company paid back an Energy Department loan last week. Earlier today, its CEO announced plans for a nationwide system of supercharging stations. And Tesla’s main competitor, Fisker Automotive, has hired bankruptcy advisers.
The underlying fundamentals are not favorable, however. Tesla is valued at 71 times book value (total assets less total liabilities). Its current market capitalization of $12.1 billion ranks among the top 10% of all stocks in our Stock Investor Pro database. Tesla is not projected to be profitable until 2014, with forecasts ranging from a loss of $0.15 per share to earnings of $2.26 per share. In other words, analysts are extraordinarily divided on how profitable the company will be next year. The difference in forecasts is even wider for 2015. Plus, Tesla has never generated positive cash flow from operations.