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Tesla Motors Stock (TSLA): a Big Risk With a 30-50X Potential Reward: Baron

Tesla Model 3 (TSLA)

Billionaire Ron Baron is super bullish on Tesla Motors Inc , and believes that he can make 30 to 50 times his money on his investment in Tesla, over the next 15 years. The expert described the EV firm as “maybe the most interesting company” he has ever invested in his career of 46 years. During the Baron Investment Conference in New York City, Baron said, “I think with this investment from here in the next 15 years, we can make 30 to 50 times our money.”

 Tesla stock – big risk, big rewards?

Currently, Baron holds 1.5m Tesla Motors Inc shares, valued at around $300m, which is 1.5% of his asset. Barron said the stock was around $33 during the time of initial investment. As per Baron, average cost of buying the stock for more than 3 years is $200 now. Tesla made its all-time high of $280 in July 2015. Currently, the stock is trading around $190.

Tesla Motors Inc. (TSLA) Store in Southern California

However, he also admitted to “Squawk Box” that investing in the EV firm was a risky move as the company initially had to prove the concept, then show that they can make it and generate profit from that concept as well. Also, he said that no one else, except the people who buy their product, want Tesla to succeed.

“The car dealers don’t want you to succeed because the [Tesla] cars don’t need service. The unions don’t want you to succeed because Tesla is remaking the way you make cars.”

Baron feels that the time will come when all others will follow Tesla’s footstep. Baron said there are around 200m cars in the country, and “17 million cars produced in this country, I think they are all going to be electric someday.” As a result, as per Barron, there will be never seen before demand of electricity, but how will it get fulfilled when  the electricity grid is not growing , and new power plants are not coming up.

Well, the answer is SolarCity.

SolarCity – a big role to play

Baron also talked about Tesla’s acquisition of SolarCity, and believes that it will play an important role in the electricity evolution and transformation. With the acquisition of SolarCity, Tesla Motors Inc is reinvesting in the electricity grid, which is a bigger opportunity than cars and is also a detrimental decision if the company wants to have enough electricity for making electric cars and running them on the street thereafter.

Tesla/SolarCity merger got a green signal on Friday from Institutional Shareholder Service. Consumer Edge Research automotive analyst Jamie Albertine said, “We’re very comfortable being equal weight on the solar side while getting up to the curve and seeing how the synergies play out over time.”

The Palo Alto-based company posted a profitable quarter last week, reporting adjusted quarterly earnings per share of 71 cents compared to a loss of 54 cents per share.

This article is not intended as individual or reader-specific investment advice. Do your own research and consult a financial professional, if necessary, before investing in anything.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.