Doug Kass probably isn’t a happy man at the moment. The Seabreeze Partners founder publicly stated he was short one of the top momentum names in the market, Tesla Motors (TSLA), going into earnings, presumably on valuation concerns. As we have noted many times on Breakout (case in point, Amazon), being short a company that’s radically upending an industry on valuation concerns is a recipe for something called “a bad time.” (UPDATE: Kass just doubled-down on his Tesla short.)
Jon Najarian, co-founder of optionMONSTER, has sympathy for Kass, but not much. “You can’t do a Benjamin Graham [valuation analysis] on this stock,” he says, “GM (GM), Ford (F), sure you can do that. But a stock like this, that doesn’t even want to call itself car company, wants to be a technology company, you can’t do a Benjamin Graham analysis.”
Tesla reported blowout earnings last night, and the stock is screaming higher, hitting all-time highs. The company reported a massive EPS beat and says it will sell 55% more vehicles this year compared to last year. But what has piqued market interest is CEO Elon Musk claiming growth in China will be strong, so strong in fact that demand may be “unmet” in the near term.
“When Elon Musk comes out and says China will be as big as North America is already, in 2015, he’s not looking out five years, he’s saying next year.”
Najarian notes “the stock has pulled back a little bit” from highs hit in the pre-market, but he still feels the stock will go higher and soon. As for short sellers like Doug Kass, who claims he will maintain his short, they will be carried “feet first” out of their positions as long as they stick with a valuation analysis on the stock.
Ultimately, when trading a hard-charging stock like Tesla with lots of “hot money” coming into it, this savvy options trader warns “you have to very nimble and take profits when it moves.”
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