Tesla: Stock of the week

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<p><strong>Andrew Willis:&nbsp;</strong>Tesla (<a href="cmsgo+security:/#0P0000OQN8">TSLA</a>) recently announced quarterly results that were an all-time company record. Revenues were up 74 per cent year-over-year&hellip; sales up 13 per cent quarter-over-quarter&hellip; and it wasn&rsquo;t good enough for the price.</p> <p>We think Tesla has a chance to be <em>the</em> dominant electric vehicle firm, <em>someday</em>, but not today. It&rsquo;s still too expensive. Sector strategist David Whiston thinks the stock continues to trade on the chance that Tesla becomes <em>massively</em> larger over time. But how far ahead are investors looking?</p> <p>Tesla will have growing pains and recessions to fight through&mdash;along with increasingly intense competition from legacy automakers with potentially lower-cost products.</p> <p>Even though the <em>current</em> situation sees the company trading about twice our fair value estimates, we still think the company&rsquo;s making some great moves&mdash;like its capital allocation practices. The company can now easily pay off over US$17 billion in debt thanks to cash on hand at the end of March.</p> <p>Elon Musk says that Tesla could sell 20 <em>million</em> vehicles yearly by the late 2020s&mdash;up from the 800,000 we expect for 2021, which will make it twice the size of Toyota and Volkswagen today. We think that&rsquo;s tough to achieve.</p> <p>But if we are wrong about our sales estimates, all else remaining constant, it would change our fair value estimate for the company to over <em>$1500</em> US dollars a share.</p> <p>For Morningstar, I&rsquo;m Andrew Willis.</p>

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