Tesla’s recent release of the much anticipated Model X SUV is a great milestone for the company, and it brings Tesla another step closer to the elusive big clean profits that the market has already started to price into the stock. For some perspective, Tesla has a $32 billion market capitalization, but its net income has consistently been negative and it isn’t expected to turn positive until 2016. And on a price-to-2016-earnings ratio, Tesla (101.05 P/E16) trades at a 14x premium to Ford (7.25 P/E16) and 16x premium to GM (6.22 P/E16). It is certainly possible for Tesla to eventually grow into its high valuation by selling more vehicles (the Model 3, in particular), but it is Tesla’s other growth opportunities that make the company even more interesting. In addition to the unique growth opportunities offered by Tesla vehicles, the company’s energy initiatives as well as the possibility of a shared mobility market dramatically increase the company’s potential. We review a variety of pros and cons as input into our Tesla valuation, and then also provide a review of Tesla’s stock price volatility.
Pro: Sources of Growth as an Automaker:
Model S: Deliveries of the Model S vehicle continue to grow. Tesla commenced deliveries of the Model S in June 2012, and through 2014 had delivered almost 57,000 Model S vehicles worldwide. However, in 2015 Tesla expects to deliver 50,000 to 55,000 vehicles (almost as many as the previous 2 and 1/2 years combined) including mostly Model S vehicles and also the newly released Model X vehicles. Tesla describes the model S is a “four door, five-passenger premium sedan that offers exceptional performance, functionality and attractive styling.” Model S inherited many of the powertrain innovations Tesla introduced with its first vehicle, Tesla Roadster, which was in production from 2008-2012 (Tesla sold a total of about 2,400 Roadsters). Tesla continues to improve features, and orders continue to accelerate with greater availability of Model S 85D and the recent launch of Model S 70D.
Model X: Tesla expects continued growth following the recent release of its new seven seat sport utility vehicle, the Model X. Tesla does not expect Model X to cannibalize Model S sales, but still provides guidance for 2015 total vehicle sales (Model S and Model X combined) instead of reporting them separately. Regardless, Model X should help Tesla reach additional customers and increase revenues.
Model 3: In 2017, Tesla plans to release the Model 3, a lower priced sedan (~$35,000) designed for the mass market. Considering the current Model S 85D costs $85,000 (not including tax credits and gas savings), Tesla vehicles are too expensive for the average consumer. However, if the Model 3 is successful it could help Tesla grow into its current market capitalization. According to the company’s website, Tesla has a planned production rate of 500,000 vehicles per year in the latter half of this decade, and CEO Elon Musk believes the company can continue to grow far beyond that level. For reference, Ford sold 6.3 million vehicles globally in 2014. Tesla expects customers will be able to start pre-ordering the $35,000 Model 3 vehicle in March, 2016.
Gigafactory Production: Through large economies of scale and innovative manufacturing, Tesla’s Gigafactory creates a unique competitive advantage for the company. It is currently estimated that batteries are responsible for 20% of the average selling price of Tesla’s expensive Model S vehicles, but according to Jefferies analyst Dan Dolev the price of batteries could be reduced by 50% over the next five years thus significantly increasing the profitability of the future Model 3.
Supercharger Network: Tesla’s supercharger network puts it ahead of the competition and creates an opportunity for increased revenue. For example, Tesla has a first-mover advantage in electric vehicle charging as the company has already made significant efforts and plans to build out its supercharger network, whereas the competition is years behind thus making their vehicles less practical to consumers for the time being. Additionally, Tesla’s CEO Elon Musk explains he’d like to open up Tesla’s growing supercharger network to other electric vehicles (e.g. Chevy Volt’s and Nissan Leafs) whereby they’d share the capital costs. Sharing the capital costs of the supercharger network would fall directly through to improve Tesla’s bottom line. Also, there could be additional incremental revenue opportunities by offering products and services at supercharger locations similar to what oil and gas refiners do at gas station convenience stores. While supercharging is currently free, this may not always be the case for new vehicles and there are opportunities to be created while drivers wait 20+ minutes for their vehicles to charge.
Standard Setting: Tesla has opportunities to keep itself relevant and profitable by setting standards in the electric vehicle industry. For example, by sharing its supercharger network it will essentially ensure other electric vehicle manufactures design their vehicles in a way that is compatible with Tesla’s charging design. This helps ensure someone else doesn’t design electric vehicles in a way that makes Tesla obsolete. Similarly, Tesla already considers powertrain engineering one of its core competencies, and the company isn’t just engineering powertrains for its own vehicles, but for some Toyota and Mercedes Benz vehicles as well (annual report, p.19). This also helps Tesla stay relevant. Interestingly, Tesla openly shares all of its patents in the spirit of “open source sharing” and for the “advancement of electric vehicle technology.” Further, seeing as how Tesla’s Gigafactory puts it ahead of the completion in terms of mass low cost battery production, there are future opportunities to set and share standards and remain relevant.
Pro: Outstanding Image and Brand:
Another major “pro” for Tesla is the company’s strong brand name. For example, Tesla’s P85D recently received a perfect score of 100 from Consumer Reports, which is the highest score ever issued. This helps strengthen the brand name, but the brand goes beyond simply really great vehicles. Tesla vehicles receive high praise because they don’t use fossil fuel. In fact, Tesla was receiving an incredible amount of positive media attention a little over a year ago when oil prices were over $100 per barrel and gasoline was in the $4.00 to $5.00 per gallon range. However, the clean energy theme goes beyond simply money. Most people recognize value in decreasing their carbon footprint, and in some cases are willing to pay up for it. As an analogy, many coffee-drinkers are willing to pay high prices at Starbucks because they agree with some of the company’s social priorities. Or, some people voluntarily pay higher rates to their electric companies in order to increase the companies’ use of clean energy sources. Overall, Tesla has built a very strong brand name that helps the company maintain its premium market valuation.
Pro: Tesla Energy as a source of Growth: Tesla has additional growth opportunities in industrial and residential battery production. In Q2 2015, Tesla launched its $250/kWh industrial Powerpack and its $350/kWh residential Powerwall. These are batteries that charge using electricity generated from solar panels, or when utility rates are low. According to Tesla CEO, Elon Musk, “the total addressable market size for Tesla Energy products is enormous and much easier to scale globally than vehicle sales.” Tesla already has reservations for over $1 billion worth of energy storage. And Analyst Andrea James of Dougherty & Co. believes Tesla will sell 75,000 of its Powerpack systems and install 80,000 of its Powerwall systems globally in 2020. Tesla Energy is a significant growth opportunity outside of vehicle sales.
Pro: Shared Mobility as a source of Growth:
In recent weeks, additional news of Tesla’s interest in self-driving vehicles has increased. For example, Morgan Stanley recently increased its Tesla price target by 66% based on self-driving technology. Referring to this technology as “shared mobility,” Morgan Stanley believes it could “more than triple the company’s potential revenues by 2029.”
When asked about self-driving vehicles in a recent (September 2015) interview, Tesla CEO Elon Musk said:
“The Tesla that is currently in production has the ability to do automatic steering…auto pilot on highways. That’s currently being beta tested and will go into wide release probably next month. So, we’re probably only a month away from having autonomous driving at least for highways and for relatively simple roads… My guess as for when we’ll have full autonomy is about three years. However, regulators will probably not allow full autonomy for maybe one to three years after that. As to when it will be technologically possible, I think three years.”
Tesla's newly released Model X features Autopilot, which is Tesla’s “semi-autonomous driving system; and the company says that both vehicles (Model S and Model X) will stay in lockstep as Autopilot becomes more advanced and new software builds roll out.”
Self-driving, ride sharing: Self-driving vehicles open up enormous growth opportunities for Tesla. For example, it would allow Tesla to compete with taxis and ride sharing services like Uber. For reference, some analysts put Uber’s valuation as high as $50 billion. Tesla would have a competitive advantage over Uber and taxis in general because of its less expensive cleaner energy and by not having to pay a driver. Further, Tesla is ahead of the competition (e.g. Apple, Google, and Mercedes) in the race for shared mobility because of its electric vehicle engineering/manufacturing, its driverless vehicle technology advances, and its first-mover advantage with its supercharger network. Additionally, owners of self-driving vehicles could theoretically loan them out when they’re not being used, thus opening another significant value-added opportunity.
Self-driving, advertising: Self-driving vehicles also open an enormous revenue opportunity for Tesla with regards to advertisements. It is well know that Tesla already collects enormous amounts of data about its vehicles with regards to everything from diagnostics to vehicle location. Tesla could use this information to create targeted location-based advertisements for owners. For example, if you drive past the same coffee shop at 3pm every day, then you could theoretically be targeted with very specific advertisements. Further, if owners aren’t driving the vehicles while they are riding in them, then they can spend more time surfing the Internet or watching television which creates a very significant opportunity for Tesla to gather data and collect advertising revenues.
In addition to the many “pros” that Tesla has going for itself as mentioned above, there are also a variety of noteworthy “cons.”
Con: Negative Net Income: Perhaps the most obvious “con” is that traditional “value” investors are turned off by the company’s consistent negative net income (2014 Annual Report, p90), leaving nothing to return to shareholders in terms of dividends or share buybacks. Now obviously this is common for newer growing companies, but Tesla has already ballooned to a $32 billion dollar market capitalization. The tech bubble of the late 1990’s and early 2000’s hasn’t been forgotten by many investors that got burned when plenty of companies with large market caps and zero earnings saw their valuations and stock prices absolutely destroyed when the bubble burst. Further, traditional valuation metrics such as price-to-earnings ratios and discounted cash flow analysis are flashing red lights and warning signs. Using famous value investor Ben Graham’s valuation formula (EPS x (8.5 + (2 x growth)) suggests Tesla is a horrible investment (because its EPS is negative) making it what Graham would call speculation, not investing.
Con: Tesla’s vehicle sales growth estimates are very aggressive. As mentioned earlier, Tesla has a planned production capacity of 500,000 vehicles per year in the latter half of this decade. That number represents ten times the number of vehicles they’ll deliver this year. Further, a 2014 Navigant Research report forecasts total annual US electric vehicle sales won’t exceed 514,000 until 2023. Granted this is only US sales (not global), but as of September 2014 the US accounts for 47% of global electric vehicle sales. Assuming the 47% remains constant that means Tesla needs to account for 45% of global electric vehicle sales in 2023 to hit its 500,000 vehicle capacity. That would be a very impressive accomplishment for Tesla considering the competition continues to become more aggressive.
Con: Tesla’s competition is intensifying: For example, Apple is targeting 2019 to begin shipping an electric vehicle of its own. And unlike Tesla, Apple has very deep pockets and won’t need to worry about coming up with enough capital to fund production. And while Tesla leads in US electric vehicles sold this year through September (17,306), the less expensive Nissan Leaf has sold a respectable amount too (13,630) (keep in mind these are vehicles sold, not vehicles delivered as many recent Tesla deliveries were for orders placed long in advance). And in the luxury electric vehicle market Audi is targeting 2018 to transition its electric vehicle concept into a full-production 500-horsepower Quattro SUV to compete with Tesla’s newly released Model X. And there is certainly more competition in the industry through the likes of the BMW i3, the Volkswagen Golf, and the Chevrolet Volt, to name a few. If the industry is truly pivoting to electric vehicles in a more significant way, then Tesla will certainly face intensifying competition.
Con: Low oil prices make the transition to electric vehicles less economically urgent. As mentioned previously, Tesla was receiving an incredible amount of positive media attention a little over a year ago when oil prices were over $100 per barrel and gasoline was in the $4.00 to $5.00 per gallon range. However, with advances in oil and gas extraction technologies, energy prices have declined dramatically and reduced the “pain at the pump.” And while low gas prices haven’t been the most significant factor in high-end luxury Model S (and now Model X) sales, they will likely be a very significant factor in the more mainstream and economically sensitive Model 3 market upon which so much of Tesla’s expected growth is predicated. Lower gas prices make the Model 3 less competitive.
Con: Tax incentives are subject to change. According to the IRS, Tesla may soon lose some tax benefits for manufacturing electric vehicles. Specifically:
"Over the one-year period beginning with the second calendar quarter after the calendar quarter in which at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States (determined on a cumulative basis for sales after December 31, 2009) (“phase-out period”). Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period. Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period."
This rule will have a negative impact on Tesla if it is not changed. Additionally, California offers its own tax incentives for electric vehicles, and California has been a big state for Tesla sales. According to DriveClean.ca.gov, many Tesla’s are eligible for an additional $2,500 tax credit (in addition to the $7,500 credit offered from the federal government). Similar $2,500 tax credits are not offered in all US states, and it is subject to change in California. Additionally, Tesla brings in tens of millions of dollars selling its Zero Emission Vehicle (ZEV) credits to other auto makers.
Con: Funding may become more challenging: In August, Tesla announced another common stock offering (in the amount of $500 million) to be used to “accelerate growth of business, including Tesla Energy, and development of Model 3 and Gigafactory.” As of the end of the second quarter Tesla had $1.15 billion of cash and short term investments on hand, and about $2 billion of long-term debt. It’s nice that the stock price is high and Tesla can raise more cash in the public market, but the company used over $1 billion of cash on operating losses and capex in 2014 and another $1.1 billion through the first six months of 2015. If the company doesn’t start generating significant cash flows soon it may become more difficult to raise more cash via debt, and the stock price may decline making it more difficult to raise cash through another public stock offering. A possible further complication is that if the US Federal Reserve starts raising interest rates as they are widely expected to, then it will make debt borrowing more expensive for companies like Tesla. Further, an increase in interest rates could slow growth stocks across the board and make it more challenging for Tesla to complete another large public stock offering. Considering Tesla’s vehicle pre-orders and expected positive earnings in 2016, the company may have no significant liquidity problems, but this is something worth watching.
Con: Charging Tesla batteries is an inconvenience. While Tesla continues to build out its supercharger network, it is still an inconvenience. It takes twenty minutes for only half of a charge, and drivers need to go way out of their way to find one. Charging at home can be a time consuming inconvenience as well compared to the conventional gas stations all over the US where you can fill up and be on your way in just a few minutes. And while Tesla offers free lifetime super-charging for the Model S, it’s not free to Tesla and at some point this cost will likely be passed on to the consumer if Tesla achieves the profitable sales growth it is targeting.
Con: Many Tesla vehicles are charged with fossil fuel sourced electricity. According to the US Energy Information Administration (EIA), many states receive most of their electricity from fossil fuels and coal in particular. This means when Tesla owners recharge their vehicles they are largely recharging with dirty fossil fuel. For example, California (a big state for Tesla sales) gets only 1% of its power from coal, but nearby neighbor Utah gets 81% of its power from coal. For Tesla to expand across the country with mass sales of its Model 3 would mean many of those vehicles would be powered by dirty fossil fuels anyway.
Con: Expectations are very high: The market has set very high expectations for Tesla, and is already giving the company credit for an enormous amount of growth. Tesla still has a lot to prove in terms of operationally and technologically executing on its extreme growth plans. Inevitably, there will be bumps in the road along the way.
Given the high level of uncertainty regarding Tesla’s future, we start with a base case valuation and then provide conservative and aggressive valuations as well.
Base Case: Our base case valuation assumes Tesla can increase vehicle sales to 500,000 per year by 2020, 1 million vehicles per year by 2025, and then continued growth of 2.5% per year thereafter. We also give Tesla some credit for Tesla Energy and shared mobility.
We assume Tesla generates $23 billion in revenue from vehicle sales in 2020 via a 4-to-1 mix of $35,000 Model 3’s and $90,000 Model S’s and X’s, and $50.8 billion in revenue in 2025 (we’re factoring in 2% vehicle price inflation from 2020-2025 and the same sales 4-to-1 sales mix). Next we assume Tesla can maintain a 25% gross margin on vehicle sales. This is a moderate estimate considering Tesla’s gross margin was 27.6% for 2014 (Annual Report, p.47), and we expect the company to maintain a similar ratio in the future based on higher vehicle production volumes, supply chain efficiencies and component cost reductions, partially offset by one-time manufacturing inefficiencies associated with ramping Model X and eventually Model 3 production. We use the market cap to gross margin ratios of General Motors and Ford as comparable valuations for mature automakers, and then apply that average ratio to our 2025 Tesla vehicle sales estimate. This methodology values Tesla’s vehicle business at $257.88 per share without considering Tesla Energy or Shared Mobility.
Tesla Energy has generated over $1 billion worth of reservations since its launch in the second quarter of this year. Elon Musk believes demand for stationary energy storage products will be approximately double that of cars going forward.
As mentioned previously, Dougherty & Co believes the mix of Tesla Energy product sales will be 75,000 Powerpack systems and 80,000 Powerwall systems globally per year by 2020. Assuming a $3,250 price tag on the Powerwall and $25,000 for Powerpacks suggests nearly $1.9 billion in annual revenue by 2020. Musk says margins on Tesla Energy are fairly low right now, but he expects them to increase to 20% once the gigafactory is online. If we assume half of this 20% gross margin passes through to Tesla’s bottom line then that gives Tesla an extra $190 million of earnings in 2020. If we apply a 20x multiple to these earnings (and then discount to present dollars) that makes Tesla Energy worth about $3.8 billion, or $25.88 per share.
Tesla’s future shared mobility business is challenging to value considering it hasn’t been officially confirmed by the company. However, Tesla’s does confirm it is working on driverless vehicles, and when asked, Elon Musk does not deny the possibility of shared mobility. As a comparable business, some sources value Uber at $50 billion. If Tesla is able to eventually offer a driverless Uber competitor it would have the competitive advantages of not having to pay drivers and lower energy costs. Of course shared mobility is only speculation at this point, but where there is smoke there is usually fire. For this base case scenario we’re adding $2 billion to Tesla’s valuation for Shared Mobility, approximately $15.41 per share.
Using a sum-of-the-parts methodology (vehicles + energy + shared mobility), we value Tesla at $299.17 per share for this base case scenario. As a double check, we use a valuation formula first published by Warren Buffett’s mentor, Benjamin Graham, back in the 1940’s: EPS x (8.5 + (2 x growth)). Instead of using current earnings (which is negative) we use the 2016 earnings estimate ($2.45 per share) and average 5-year annual growth estimate (88.15%) of the 18 professional analysts included Yahoo Finance, and then assume the company will grow at 3% per year thereafter, to come up with a present value of $393.49 per share. This number is higher than our $299.17 base case valuation, suggesting these analysts are expecting higher growth. However, before getting into our higher growth aggressive Tesla valuation, next we review our conservative Tesla valuation.
Conservative Valuation: Our conservative valuation assumes Tesla can increase vehicle sales to 500,000 per year, but not until 2025 (five-years behind schedule), and that the company will grow at 2.5% per year thereafter. In this scenario we estimate Tesla Energy revenues to be $1.5 billion per year in 2020, and to grow at 2.5% per year thereafter. And we assign no value to Tesla shared mobility because this is not yet a formal Tesla initiative, and there is no assurance that it ever will be.
Our 500,000 vehicle sales per year by 2025 assumes there will be delays in ramping Tesla’s gigafactory to full production, and that competition and operational/technological challenges will prevent Tesla from ever growing significantly beyond 500,000 vehicles per year. While the market is highly enthusiastic about Tesla’s prospects, the reality is that the company is not yet profitable, and there is no guarantee the company will ever deliver on the market’s lofty aspirations. Additionally, we assume Tesla’s vehicle profit margins slip to only 11% which is comparable to mature auto manufacturers Ford and GM. Again using the market cap to gross margin ratios of General Motors and Ford as comparable valuations for mature automakers, but this time applying that average ratio to our lower 2025 Tesla vehicle sales estimate, values Tesla’s auto business at only $56.73 per share.
We assume Tesla Energy grows to only $1.5 billion in sales by 2020, and then grows at only 2.5% per year thereafter. We also assume the company falls short of Elon Musk’s 20% gross margins expectation. Rather, we assume the company only achieves 10% gross margins, and only 50% of that falls through to the bottom line. This means Tesla Energy adds only $75 million to the company’s bottom line each year. In this scenario, we assign a 15x valuation, making Tesla Energy worth only $7.66 per share.
Using a sum-of-the-parts methodology, Tesla is worth only $64.39 per share in our conservative valuation estimate. This valuation is significantly below the company’s current stock price, but not unrealistic if Tesla is unable to achieve the hyper-growth expectations that the market has already priced into the stock.
Aggressive Valuation: Our aggressive valuation assumes Tesla achieves its 500,000 annual vehicle sales target by 2020, and then is able to grow to 2 million vehicles per year by 2025, and then grows at 2.5% per year thereafter. Using the same methodology as our base case and conservative estimates, this gives Tesla’s vehicle business a valuation of $569.30 per share. Additionally, we assume Tesla sells twice as many energy product units as vehicles in accordance with Elon Musk’s expectations (as mentioned previously, Musk believes demand for stationary energy storage products will be approximately double that of cars going forward). Using a 20x multiple, and assuming a 50/50 Powerwall to Powerpack sales mix through 2025, this gives Tesla Energy a value of $340.04 per share. Lastly, we assign shared mobility a $50 billion valuation recognizing more of the potential that this initiative offers. Valuing shared mobility is challenging considering there is very little information available and it is not yet a formal Tesla business. Some sources value the total global taxi industry at $100 billion. We value Tesla’s potential shared mobility business at $50 billion ($385.21 per share) considering its potential to disrupt Uber’s business, for example, which has been valued at around $50 billion as mentioned previously. Tesla’s advantage versus competitors in the pursuit of shared mobility comes from its leadership position in electric vehicle engineering and manufacturing, its recent advances in driverless vehicle technology, and its first mover advantage in building out a supercharger network. Adding up automobiles, energy and shared mobility gives Tesla a valuation of $1,294.55 per share and a market capitalization of $168 billion. Incidentally, our aggressive valuation is still far below what Elon Musk thinks Tesla is worth (he thinks Tesla should be worth as much as Apple, ~$629.5 billion, by 2025).
While Tesla’s stock has gained over 1,300% since its initial public offering (IPO) in 2010, it has not been without ups and downs. For example, during this time period the standard deviation of Tesla’s daily return has been around 3.5% while the Nasdaq has been slightly over 1%. Using daily returns since its IPO, Tesla’s “beta” relative to the Nasdaq is around 1.28 (beta is a measure of risk for an individual stock compared to the market as a whole, in this case the Nasdaq). And while beta has significant explanatory power for Tesla’s daily stock movements, a couple other factors are worth considering, namely interest rates and oil prices.
We ran a linear regression with Tesla’s stock price as the dependent variable and our independent variables were the Nasdaq, interest rates (10-year treasuries), and oil prices (West Texas Intermediate). Our regression explains about 92.3% of the daily variation in Tesla’s stock price, and not surprisingly the performance of the Nasdaq has the most explanatory power (~90.5%) for Tesla’s daily stock price moves. However, interest rates and oil prices are both statistically significant in explaining the other 1.8%.
Interest Rates and Tesla’s Stock Price: The significance of interest rates in explaining Tesla’s daily stock price moves is worth considering. Because the relationship is positive (if interest rates go up, Tesla’s stock price goes up), it suggests Tesla is not in imminent danger of not being able to raise additional capital in the debt markets if need be. If the relationship were negative it could indicate Tesla would have trouble raising capital. This is important because Tesla may need to raise additional capital in the future to fund growth. The fact that the relationship is positive suggests a “risk-on, risk-off” phenomenon whereby if fear in the market spikes (causing people to pile into treasuries) investors also exit high-risk aggressive growth stocks like Tesla.
Oil Prices and Tesla’s Stock Price: The significance of oil prices in explaining Tesla’s daily stock price moves is also worth considering. The relationship is positive (if oil prices go up, Tesla’s stock goes up, and vice-versa) suggesting that the demand for Tesla vehicles may increase when oil prices are high. This makes sense, particularly when considering Tesla’s future Model 3 vehicles. While consumers of Tesla’s higher-end Model S and Model X vehicles are often more concerned with luxury than with cost savings, this dynamic may change as the more economical Model 3 vehicle eventually becomes a large driver of Tesla sales. The regression suggests that Tesla’s stock price has historically increased about 25 cents for each $1 increase in a barrel of oil. This is important as the price of oil has fallen from over $100 per barrel last year to as low as $38.50 earlier this year. This dynamic may become more pronounced as Tesla moves closer to its planned 2017 release of the Model 3 (pre-orders are expected to begin in March of 2016).
Tesla’s growth opportunities are spectacular. And the recent release of the Model X SUV is a great milestone for the company. However, Tesla is being valued based on what the market expects it to do in the future. And whether Tesla can make good on the extreme growth expectations is yet to be proven. Considering Tesla generates negative net income, purchasing the stock is what famous value investor Benjamin Graham might refer to as speculating, not investing. Regardless, the company has incredible potential, and will be very interesting follow.