AP Photo/Mark Lennihan
Resistance is futile.
Elon Musk's electric car startup has major momentum. There's no debate about that. Everyone wishes they'd bought at $20.
Albertine recently checked out Tesla's Fremont, Calif. factory, and the experience seems to be driving his bullishness. In his note to accompany the upgrade, he runs through a litany of business challenges facing Tesla, then concludes that although "[t]here are no fewer than a half-a-dozen other key concerns we share with industry purists, the reality is, these issues simply do not matter with respect to TSLA's stock." [emphasis added]
The bottom line is that while he hasn't forgotten about all the risks Tesla is up against, he's not going to worry about them seriously for a few more years.
But the story here is obvious: Tesla has now completed the transformation that began with its 2010 IPO. It was a car company. Now it's a stock, first and foremost. "TSLA sentiment is like a freight train, in our view, benefiting from a well manicured growth story that has caught the eye of a much broader investor base relative to most auto stocks," Albertine writes.
REUTERS/Stephen Lam We build freight trains.
There's a crucial logic at work here. Right now, Tesla needs to be a stock, first and foremost. Wearing down any residual resistance on Wall Street to the company's "growth story" is critical for Musk & Co, as they prepare to take Tesla to the next level, rolling out the Model X SUV next year and the Model 3 mass-market electric car by 2017. Not to mention building one or more massive battery factories.
The Tesla story is a sexy story. Investors want to be a part of it.
The larger auto industry is a different story. With U.S. sales above 16 million new-vehicle pace for 2014, good old gas-powered cars are doing better than fine. The recovery from the dark days of 2009 is complete. Relatively stable gas prices are bringing Americans back to trucks and SUVs - a boon for the carmakers, who can make higher profits on these models.
Meanwhile, the startup electric vehicle markets has collapsed, as essentially everyone except Tesla has fallen off the map. This compelled Musk to take the unprecedented step of releasing Tesla's patents, in an effort to revive the startup EV scene and prevent Tesla from being in a market of one.
The major automakers have relegated electric cars to niche/experimental status. Sales of the Nissan Leaf have been weak. Chevy's Volt sales have been weaker. Fiat-Chrysler CEO Sergio Marchionne argues that the electric version of the Fiat 500 isn't worth buying.
It isn't that there's Tesla - and everybody else.
It's that there's Tesla - and nobody else.
Albertine writes that Tesla "will eventually face stiffer competition from traditional OEMs," but that's a big "eventually." Tesla is already facing competition from traditional automakers on price, as customers decide buy high-five and six-figures luxury vehicles that run on gas rather than taking the plunge on the only car that Tesla is currently selling, the Model S sedan.
As for the stocks of traditional automakers, such as General Motors and Ford, the conversation is happening on different planets. GM stock is down 15% year-to-date. Ford is up about 14%.
But Tesla is up over 80%. That's not a car-company return - that's a tech company return.
Yahoo Finance Eat my dust.
Obviously, Tesla is in the car business. But it isn't in the same car business as all the other carmakers. Tesla has been so successfully disruptive that its theoretical competition has surrendered. The GMs and Toyotas of the word are now going to see what happens with Tesla and then make decisions about whether to more aggressively enter the business that Tesla is in.
Until then, Tesla - and its investors, and anyone who's following the company's story - can enjoy the ride.