Editor’s Note: The following is an opinion piece produced by Nicky Friedman of The Motley Fool.
Tesla Motors, Thor Industries Inc., Boston Beer, and Chipotle Mexican Grill make and sell vastly different products in different industries to entirely different demographics. When it comes to these names as investments, they share one key problem in common, and it’s a problem many companies wish they had.
The Tesla problem
No, I’m not referring to any fire unless by fire you mean the fiery demand. For all of 2013 and into the foreseeable future it looks like, as Tesla’s CEO Elon Musk has been quoted as saying, “We really are production constrained not demand constrained.”
Tesla has been steadily ramping up production and is seeing its margins improve accordingly. Recently, the company announced it delivered 6,900 vehicles in the fourth quarter compared to guidance of 6,000. For a company that has some customers who have been waiting as long as two or three years for a delivery (such as in Europe), increased deliveries translate into increased production.
The market loves it, and Tesla hit new highs leading up to its earnings announcement. Still, a lot of expectations are baked into Tesla’s stock price, as it trades with a P/E ratio over 100 compared to 2014’s estimated earnings. The market clearly expects growth and earnings beyond 2014 to be at extremely high levels. Whether it achieves that or not will depend on production first and foremost. Tesla’s problem is that it can’t make its cars fast enough to meet demand.
The Thor Industries problem
Thor Industries makes and sells two types of recreational vehicles, or RVs. There is the towable kind and the motorized kind, but it’s the motorized RVs in particular that are seeing off-the-scale demand. According to the Recreational Vehicle Industry Association (RVIA), an improving economy and easier credit is causing a flood of demand from consumers toward buying motorized RVs. As such, Thor Industries and its competitors such as Winnebago Industries Inc. are seeing an explosion in motorized RV sales and backlog.
Thor Industries last quarter saw a 45% pop in motorized RV sales. This was during a time considered “the off season,” and sales were even higher than the seasonally superior summer quarter. Its backlog for motorized RVs more than doubled and represented multiple quarters worth of sales. Just like for Tesla, for Thor Industries it is currently a matter of how many units the company can produce and how fast. For now, Thor Industries’ problem is ramping up production.
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