Why I'd Buy The Model 3 And You Should Buy Tesla

Maybe it's some kind of kismet. Or maybe I just want it to be...

I saw a Tesla Model S cruising down the highway in Milwaukee the day after Elon Musk revealed his brand new Model 3.

It was pretty slick. Nice styling, cool feel. Not like the impression you get with a Prius... This was something that even electric car-naysayers could admire.

It's this slick approach that puts Tesla in a very different category than previous EV or hybrid makers, and it's also why Tesla has garnered an almost cult-like following.

In the run-up to the big reveal of Tesla Motors' (Nasdaq: TSLA ) new Model 3 electric vehicle, 115,000 people shelled out $1,000 to reserve one... before they ever saw what the car looked like.

And by early Sunday, that figure jumped to 276,000. That's $276 million in the bank.

The reveal was just as impressive as these figures. The Model 3 is a similar shape to the Model S, and comes with a range of at least 215 miles per charge. That's surprisingly practical for a lot of people, including me, who lives an hour away from work. It comes with an autopilot function standard, and is also supercharge compatible.

(We'll talk more about that in a minute.)

The roof is transparent, and the front seats are more forward in the car, which allows for more leg room in the back.

If this is starting to sound like a promotion for Tesla, well, it kind of is.

Because here's the thing. Even if just those first 115,000 people followed through on buying the Model 3, that would give Tesla $11.6 billion in revenue and put earnings in the green for the first time in the company's history.

It's the latest chapter in a well-thought-out story with a couple of key characters you might not have known existed.

A Revolution For The Auto Industry?

Elon Musk's business plan is actually very simple. He wants Tesla to revolutionize the auto industry and make fossil fuel-powered vehicles obsolete.

It's not an easy task. Tesla first had to change what people thought about electric vehicles. The Supercharger is ultrafast and super sleek, with a hefty price tag. The company's roadster design broke the mold for electric vehicles. It created a brand identity while changing what people expected from an EV's capabilities.

That car, which was first sold in 2008, was an intentionally low-volume, high-priced vehicle... but it not only changed people's minds about what an EV could do, it actually inspire more EV programs. Chevy credits the Supercharger for inspiring its Volt program.

Then came the Model S. This car was designed to compete with every-day sedans. It was named the best car ever made by Consumer Reports. Not the best electric car... the best car... period. It is also fastest four-door car in history.

And it won enough interest that Tesla can now fund the Model 3, a slimmed down Model S with an affordable price tag. The Model S (and its SUV counterpart, the Model X) actually paid for the development of the Model 3.

The staggered production meant that Tesla has been operating in the red. It just wasn't selling enough to be profitable. But that wasn't necessarily the goal. The goal was to create a new market for high-quality, good-looking electric vehicles.

The 276,000 people who dropped a thousand bucks to reserve their Model 3 prove that Tesla has already been successful.

But now, the numbers are starting to catch up, and investors might be interested to know that earnings are expected to jump by triple digits next quarter. What's even more impressive is that analysts are expecting earnings to jump an average of 95.4% a year for the next five years!

Sales growth figures are impressive as well. Next quarter, revenue could climb 72.4% to $2.06 billion, and this year sales could top $8.6 billion, a 63.1% pop over last year. Then, in 2017, revenue could reach $10.86 billion.

If Model 3 sales are as hot as current interest, these figures could be conservative. And that could mean a big jump in share prices, too.

Breaking through these highs is certainly a possibility if Tesla's Model 3 stokes the masses. It's certainly got me interested...

Risks To Consider: Tesla has had some problems meeting delivery because of hiccups in its supply line. Though these problems have been resolved, it remains to be seen how Tesla will handle high demand and the need for mass production on a scale it hasn't used yet.

But here's where we get back to that bit about supercharging. Tesla is building up its infrastructure, from production capacity to dealerships to charging stations all over the world.

Tesla has 3,600 supercharging stations worldwide, and the same number of destination chargers. By the end of next year, Tesla will double the number of supercharging stations and quadruple the number of destination chargers.

That infrastructure makes owning a Tesla even more accessible and practical. Combine that with the $35,000 price tag (before tax incentives), and the Model 3 could push Tesla into the green.

Action To Take: Add Tesla Motors (Nasdaq: TSLA ) to your long-term portfolio.

Editor's Note: How did a group of amateur investors crush Wall Street and earn $175 million in five years? By using a centuries-old investment strategy that quietly delivers gains of up to 170%...185%... even 297% per year. You can learn this strategy here -- and see which stocks it's currently tagged as a "Must Buy" today .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

© Copyright 2001-2016 StreetAuthority, LLC. All Rights Reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.