How far can a share of Tesla Motors Inc (NASDAQ:TSLA) go before rational exuberance kicks in?
On Monday the company’s market cap almost met that of French auto giant Renault SA (EPA:RNO), having nearly quintupled since April. This despite having sold 0.81 percent of the number of cars Renault delivered in the first half of the year.
“From there to bubble talk…” is how French-language LesEchoes.fr described the “almost perfect equality” the two automakers achieved in market capitalization on Monday, as retail Tesla zealot investors (the Teslots) continue to gamble on how far Tesla’s share price can go before the inevitable decline.
Even the more bullish estimates for the company’s share price has TSLA reaching $200 a year from now. On Monday it was trading at more than $193 per share, pushing its market value to $23.57 billion. Renault closed trading in Paris on Monday at $23.58 billion. The difference: Tesla sold 10,500 luxury electric cars in the same period – the first six months of the year – that Renault sold 1.3 million. And it’s worth noting that Renault has a long-term commitment to affordable all-electric vehicles – it has four models designed for urban commuters and commercial vehicles.
Range continues to be Tesla’s advantage – with a more-than 200-mile range – but Renault (and Nissan, and others) are betting that there’s a market for urban consumers whose driving needs fit within the sub-100-mile range of the smaller city-type vehicles. But whatever the case may be, there’s little going on with Tesla right now that hasn’t already been known for weeks. Morgan Stanley auto analyst Jonas Adam wrote in a research note last week that he doesn’t expect any “market moving developments” on the introduction of Tesla’s upcoming Model X SUV and (more important) its Gen 3 (likely to be called the Model E) for several months.
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This hasn’t swayed the Teslot investors, who have added $10 to the price of a share of the company in the past five trading days alone, including the $2.65 it piled on to the stock on Monday based on little more than whatever repetitive chatter and hyperbole is being passed around in the Twittersphere.
Meanwhile, it appears the institutional investors have seen the light. While the individual E*Trader continues to pump up the irrational exuberance. As noted by Zerohedge.com, Bank of American Merril Lynch sees institutional investors reducing their positions on Tesla, leaving the average Joe and Jane retail investor to get shafted when the long-overdue correction commences.
CORRECTION: The original story said Tesla sold 0.00081 percent of what Renault sold in the first six months of 2013. In fact, the author (who wrote this correction and is referring to himself in third person) made a calculating mistake. The correct figure is 0.81 percent. Tesla sold less than one percent of the cars Renault sold in the first six months of 2013. That's small, but not nearly as small as originally reported.