Tesla Stock Hits $80 Per Share Following Profitability Announcement

By · May 10, 2013

Model S

Tesla has proven its detractors wrong time and time again, but it still has a long way to go.

Tesla confirmed this week that it had indeed completed its first profitable quarter in Q1 of 2013. The news wasn't exactly a revelation. Tesla C.E.O. Elon Musk had all but promised this would be the case since late last year. But it does mark yet another significant milestone that doubters predicted the company would never reach. Remember, it was just last October that Mitt Romney called Tesla a "loser" during the presidential debates.

Tesla's stock price has soared since the announcement, jumping to an all-time high of more than $80 per share this afternoon—an increase of more than 45 percent from last week's high. This, from a company that seven months ago was ranked the fourth "most shorted" stock on the American indexes. Needless to say, if you were one of the investors who shorted Tesla back when it was trading in the low $30 range, you lost.

But does Tesla's victory over its detractors mean that the company is positioned to meet Musk's ambitious goals?

Great Expectations

With a posted per-share dividend of just 13 cents, Tesla's stock price currently sits at more than 150 times its projected 2013 payout. That's outlandishly high—most companies trade at about 20 to 25 times their earnings. But Tesla investors aren't buying because they expect Model S sales to compete with the Toyota Prius. They're buying because they expect Tesla to grow—meaning that as impressive Tesla's performance as a car company has been to date, expectations for the future are far higher.

As Musk readily admits, scaling production of the Model S up to 400 vehicles per week was a significant challenge in itself. As recently as a few months ago, the CEO was personally inspecting every vehicle to roll off his company's production line.

In its letter to shareholders, Tesla said that it will keep capital expenditures in the range of $200 million for 2013. This is a company that is still growing and will soon be moving forward with the release of its first SUV, the Model X, in 2014, as well as a more affordable $35,000 sedan after that.

The Model S rollout went relatively smoothly, with no high-profile hiccups—save for a bumbling New York Times writer—to slow it down. Still, transitioning from small-scale, single-vehicle production to a diversified multi-platform lineup will be a whole new challenge for a company that has cleared its previous hurdles to date.

Then there's the matter of sales. Model S sales are currently expanding to foreign markets including Europe and Asia, but the company will soon work its way through its reservation list and will have to focus on selling the car to customers who haven't been waiting for years with baited breath for its release. Are there enough buyers left out there to boost sales to more than 30,000 per year as Musk predicts? Only time will tell.

So far, Tesla's performance as a company has been positively inspiring, and it may very well be the big success story that the U.S. green tech industry so desperately needs. Still, regardless of recent stock market performance, a great deal of that story is yet to be written.

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