With U.S. stocks grinding through the first quarter of 2014, many of the last year's darlings have scuffled. One that hasn't is
Goldman's Patrick Archambault, whose price target has lagged Tesla's dizzying rise, details three "disruptive outcomes" that could mean Tesla stock is still cheap at current prices, but each scenario requires ramp-ups in line with some legendary growth patterns.
The volume trajectories of the iPhone – Archambault's "Elon Musk as Steve Jobs" scenario – and consumer durables – "Elon as the Maytag Repairmen" – suggest that popular consumer goods experience an initial bout of rapid growth followed by a slowdown five years in as competition crops up and pricing power may diminish.
In those cases, Goldman projects a global electric vehicle market that would grow to 4.7 million or 3.3 million cars by 2025*, with Tesla accounting for more than half the market. While both seem bullish, if Tesla is leading an automotive boom to match Henry Ford's Model-T, Archambault says it would imply "a fairly unwavering growth pattern" that would put the electric vehicle market at 6 million units and Tesla at 3.3 million by the middle of next decade.
The analyst is quick to admit that that case, which suggests a present stock value of $478, and the two others, are not likely to be borne out fully. Goldman assigns just an 8.3% likelihood to each, compared to a 25% chance of a slower acceleration in electric vehicle adoption that could mean the stock is worth just $66.
For Tesla investors, the bull case is compelling, but even long-time holders acknowledge there is an element of faith to the holding.
"With Tesla you're paying for everything you see and a couple of things you can't," says Drew Cupps, founder of Chicago-based Cupps Capital Management. "Six months ago I didn't know the term 'gigafactory,' but I knew they had visionary management."
Cupps, who has owned Tesla since its 2010 IPO, taking some profits along the way, owns the shares because of he believes the company is way ahead of any competition in the electric vehicle space. If electric cars are a transformative technology and Tesla is moving faster than anyone else in the space it will be difficult for them to get caught, Cupps figures, so he isn't worried about the quarterly or whether a particular sales figure might disappoint.
In Goldman's view, Tesla's current automobile business is worth $180 and the "stationary storage" business – driven by the planned "gigafactory" – is worth another $20. If Cupps is right, both could be worth considerably more.
There is always the risk that a fast-growing company might not achieve all its potential. "Any whiff of doubt, they get hit," Cupps says, but he adds that any blue-chip company today once faced the very same questions.
Tesla's most recent headwind has been New Jersey's decision to disallow its direct-sales model, but the auto industry at large is rarely without its challenges. Consider the recent
(*This was updated to make it clear that Goldman's electric vehicle market projections are for 2025, not for five years from now.)