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Tesla = Apple of Cars?

After a long time, I am writing this blog only on stocks and that too some exciting but pricey stocks. Last week Tesla's results and subsequent jump in stock caught my attention. I have been following TSLA stock since its IPO. Every time I go to Santana Row, I make a point to visit Tesla store - same way every time I visit Valley Fair mall, I make a point to visit to Apple store. This started me thinking - Can TSLA (stock) could be similar to APPL (stock) @ time of iPod introduction? Let's look at some similarities?

  • Car companies have been around for over 100 years but in a long time (maybe since Ford introduced Mustang), there has been so much excitement with Model-S introduction. Consumer Digest gave Model S almost perfect score and Tesla surprised Wall Street with profit and 25% gross margins which is unheard of in car industry. Same could be said when Apple introduced iPod.
  • Tesla is run by young CEO Elon Musk in his early 40's same way Apple was run by Steve jobs. Both had successful companies outside their primary companies and are considered as visionaries in their industry
  • Apple changed music industry forever (following by mobile phone industry). Tesla has potential to change Auto industry forever. Change from IC engine to electric engine is once in century type change and Tesla has clearly established industry leadership
  • Both companies have very similar design elements in their products, store strategy, focus on high end consumer market and "image" consciousness. 
  • And from stock market valuation point of view, I did some data mining and found that Apple was valued at around $10 Billion when iPod was introduced. Tesla at today's prices is valued at around $10 Billion as of today.
While I doubt Tesla would ever be valued at $500 Billion, I won't be surprised it if it valued at anywhere between $30-50 Billion in next 5 years. That would be 3-5 times gain in 5 years. Worth taking the risk? You can decide yourself. One thing I promised to my son: I will buy Tesla car only from profits on my Tesla investment to pay for it. After all I bought my first iPod and iPhone from profits on Apple investment. Why it should be different now?

/Shyam

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