Is it too dangerous to short Tesla?
There’s one word that creeps up in any recent discussion about Tesla’s stock price: parabolic.
Since the start of the year, the stock has risen 280%; in the last three months, it’s gone up 140%. Since today’s open, it has gone up 15%.
What’s driving Tesla? Right now, it’s an earnings story.
The company reported its quarterly financial numbers after the market close yesterday. Revenues were $405 million versus $27 million a year before. That’s a 1,400% increase in sales. Meanwhile, earnings were $0.20 per share, compared to losses of $0.89 last year this time. Both were above what Wall Street analysts expected.
Tesla also said it is increasing its production capacity to 500 cars per week. Not by 500, but to 500. Even if one were to assume they sold each one for $100,000 (and they don’t; MSRP on the low end is close to $60,000), they would have to sell each one at 100% profit for the next seven years to justify its market cap of $17.75 billion.
And, that doesn’t even account for the fact that Tesla guarantees its resale value after three years. That means some money may be going out. It’s also the reason the company can’t recognize the full revenue of its sales.
All this has led Barclays Equity Research department to be a bit nervous about its current prices. Today, they released a report summing up their entire view: “Compelling upside potential, but fairly valued; Downgrade to Equal Weight”.
So, is Tesla fairly valued, overvalued, or undervalued? Weighing in are Steve Cortes, founder of Veracruz TJM, and JC O’Hara, Chief Market Technician at FBN Securities. They look at the fundamentals and charts of Tesla to determine if it’s ready to charge.
To see Cortes and O’Hara analyze Tesla, watch the video above.
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