News articles quoted analyst Matt Therian (of Connecticut-based IPO research house Renaissance Capital) who described the general investor sentiment.
The potential for electric vehicles is indeed huge, considering that the US government is pushing aggressively towards this particular technology for automobiles. This is despite the issues associated with electricity supply/demand and the mass manufacturing of lithium batteries. It also comes in the face of the availability of another clean alternative technology, in hydrogen based fuel (which takes advantage of existing petrol station infrastructure) such as in the Honda FCX Clarity.
Its interesting to note, that the world has already decided that battery based electric vehicles is the direction that will be taken. Billions of dollars have already been spent at many levels of the auto industry, government, and pro-eco organizations, on manufacturing, R&D, advertising, public relation campaigns, etc. However, that does necessarily mean that Tesla or (Tesla’s stock) will benefit from the industry trend.
Investing in the latest or newest technologies is not necessarily bad or unprofitable. Things that are new and may have the potential to be transformational, is still not enough to be able to make a smart investment decision. Doing would be gambling.
Tesla is not yet profitable and it does not expect to be profitable for at least two years. CEO Elon Musk says that the company is planning to expand with a sedan named the Model S. But the company still faces some tough competition in general, from the major auto maker’s traditional internal combustion engines as well as their eco-friendly alternatives (battery & hybrids).
However, its important to note that Tesla’s current roadster starting at $125,000 USD is priced to attract luxury buyers, not the average citizen. The Model S is expected to be available in 2012, with a starting base price of $49,000 USD (according to Tesla 6/18/2010). Many luxury based companies sell to affluent customers who purchase their products regardless of what happens in the economy, and their purchase decisions are often not based on the price.
Investor over-enthusiasm comes hand-in-hand with investing in technology company stocks. The once mighty Dell, Microsoft, IBM, Sun, Motorola, and Yahoo shares aren’t doing very well these days. Superstar tech company RIM, Research In Motion (RIMM) is now trading at around the $50 level on the NASDAQ, when a few months ago it was at the $77 level. Their most recent quarterly earnings were pretty good, but it still managed to disappoint the market.