Spotlight: Tesla Motors

Tesla Motors (NASDAQ:TSLA) might easily be the most hyped stock of the last couple of years. Investing in Tesla in July 2010, would have amounted to a 950% profit today. But is the current stock price of $201.62 justified? If we take a look at the income statements of Tesla, we notice that they have never made a profit yet, but because Tesla is operating in a relatively new market segment high development costs can be expected and usually profits will come only after a few years. So it's not a surprise that Tesla has failed to gain profit yet. Still, investors seem to expect a large profit in the future, because the stock price is sky high for a company with negative results. Are these investors too optimistic or are they simply timing the market right while Tesla's stock price is still low? Tesla's CEO Elon Musk said last week that he expected Tesla to be profitable in 2020. Moreover, he said he does not fear the competition by General Motors (NYSE:GM) and other electric car manufacturers. We feel that Musk is overconfident of his own chances in the market. Simply because General Motors announced a car for a lower selling price and with a higher action radius than Tesla's cars. These two aspects are key when producing electric cars. Hence, we think it's odd that Elon Musk dismisses the danger of competition. Consequently, we also feel that his statement of profitability in 2020 might be overstated and that this could easily be 2025. Moreover, as time goes by, it becomes easier for other companies to enter the electric car segment, because they can produce with lower R&D costs due to reverse engineering, which will harm Tesla's profit. Therefore, even though the electric car segment might be the future for the car industry, Tesla's chances in the market may be highly overstated and current investors in Tesla may be too optimistic. This makes Tesla a big gamble in the stock market and its a gamble that Stock Smash is not willing to take.