So suddenly all we care about is cars? It is remarkable how much we now think of cars as the next frontier of the tech world, supplanting cellphones in terms of our attention span devoted to disruption and technological change.
It makes sense. We could sell 17 million cars in this country this year despite the weakness we saw yesterday in the sales numbers. We know cars are loaded with tech. We know there are amazing things being done with cars, everything from driverless to electric to perhaps even cars that just run on water, a dream that Steve Jobs tried to turn into reality.
I totally get it. Tesla's (TSLA) the most exciting thing that has ever happened to automobiles since the Model T, and Elon Musk is a visionary to rival Henry Ford without, thank heavens, the ideological baggage.
Of course, it all came together in one package when Musk talked at the Code conference about his cars and about Apple (AAPL) perhaps producing a rival car in 2010. That could matter someday. It sure doesn't matter now where Apple 's stock is caught within the realm of the iPhone and the iPhone only. Witness that the company's stock, the best performer in the Dow Jones Average in May, got dinged because Goldman Sachs (GS) lowered its price target because phone sales may not be what was expected.
What does matter for Tesla, at least, is that you have an awfully hard time procuring one because of the demand. The thousand-dollar deposits from, as last tabulated, 373,000 people for the Model 3, the stripped-down $30,000 plus version, tells you that. So does the prognosis that you may not get yours until 2018 even though Tesla raised $2 billion last month to build the factories needed to boost the output.
That's quite a difference from the incentives that are being built into the Ford (F) and GM (GM) cars these days and it's why Tesla's stock is still over the $215 price where it successfully raised the additional capital.
I have forever held that Tesla is a cult stock, meaning that I can offer nothing in the way of trying to explain how and where it trades. Musk's been remarkably successful. The Tesla is a blast to ride. I went from zero to 80 on the Jersey Turnpike in a spanking-new Tesla without even realizing it. My daughter wants a Model 3. I think only Tesla can bring back the notion that you want to get a car as soon as you turn of age, something that's no longer the case, according to the statistics we've seen. The delay in buying a new car could be related to Uber. It could be related to cost. But Teslas seem to trump all that.
I am not recommending either Ford or General Motors at the moment. Ford's jumped more than 10% since I spoke to CEO Mark Fields not that long ago and it's just not as compelling at $13 and change after those weaker monthly numbers.
But if the connected, tech-loaded car is your thing and you want a way to invest in it, why not buy the stock of NXP Semiconductor (NXPI)? When it paid $12 billion for Freescale last year, the company became the No. 1 automobile semiconductor company with as much as several hundred dollars in chips per car for the most fully loaded luxury vehicles. (Apple and NXP Semiconductor are part of TheStreet's Action Alerts PLUS portfolio.)
The total addressable market for chips in cars right now is thought to be about $30 billion as newer cars have about 100 chips controlling pretty much all the electronics in a vehicle. I think that's only going to increase over time. I know from speaking with NXP that the automobile makers would rather deal with fewer providers, so the deal which put No. 5, NXP, together with No. 4, Freescale, to become No. 1 was a stroke of brilliance, which is why my charitable trust owns it.
I can't tell you to buy or sell Tesla. The motor companies seem like value traps. But NXP Semi sells at 16x earnings. Given the excitement, frankly, that's just too cheap even after its recent run. You want excitement? Go buy a Tesla if you can. You want to try to make money? Go buy stock in NXPI.
Random musings: There is an excellent Forum piece for Action Alerts Plus subs out right now that will really help you understand the whole concept behind this one and I urge you to go there now.