Tesla may be a bubble ... but nobody caresMay 17, 2013: 11:28 AM ET
Tesla shares did something on Friday that they don't often do. They fell.
The stock was down nearly 3% in late morning trading even though Tesla (TSLA) announced that it was boosting the size of its secondary offering. Earlier this week, the electric car maker said that proceeds from this stock sale would be used to pay back the terms of a loan from the Department of Energy.
Still, it's understandable why Tesla's shares may be taking a breather. Tesla has soared nearly 175% already this year. And Tesla CEO Elon Musk has already hinted that there will be big news next week. So maybe investors are waiting to see what that is before making more bets on the company?
Either way, Tesla continues to be one of the most popular stocks on StockTwits. And many traders think the stock will keep charging (pun most definitely intended) higher.
Tesla's stock is currently hovering around $92 and is trading at 86 times 2014 earnings estimates. Even if it's not a bubble, it's undoubtedly frothy.
As for shorting at $120? It obviously has to get there first. Its all-time high is just above $97. It will be interesting to see if it can crack $100. It may test that psychological level soon if what Musk teased on Twitter this week is truly significant.
Supercharger announcement pushed to next week. Something else this week.—
Elon Musk (@elonmusk) May 14, 2013
That would obviously be huge. And for those not up on your auto acronyms, ICE refers to Internal Combustion Engines. Tesla already counts Toyota (TM) and Daimler (DDAIF) as partners ... and investors.
Another trader made light of the fact that Tesla is not only squeezing the shorts. It may be angering those who like to bash the DOE for its clean energy loans. As my colleague Chris Isidore pointed out this week, Tesla is the anti-Solyndra.
Ha. Take that, Mitt Romney?
But not everyone is convinced Tesla stock can keep flying to the moon ... on one of Musk's SpaceX rockets perhaps? Seriously, all we need is for SpaceX to go public so we can package Tesla, SolarCity (SCTY) and eBay (EBAY) together as an Elon Musk ETF. (Musk is the chairman of SolarCity and co-founder of PayPal, which is now owned by eBay.)
At least one investor thinks the Tesla trade is crowded. And a highly respected member of the financial press is skeptical too.
Herb's analysis may be falling on deaf ears. But he is correct to point out that there are some red flags in Tesla's financials. It may not matter for now though. Investors have fallen head over heels (Tears for Fears, anyone? Or The Go-Gos? I love the 80s!) with Tesla. And history shows that some overvalued stocks can keep climbing for a very long time as long as fundamentals remain reasonably strong. Just look at Amazon (AMZN). Or more recently, Netflix (NFLX).
Now for Reader Comment of the Week. Or Comments as the case may be. Restoration Hardware (RH) has been an amazing success story. It's up 50% year-to-date -- and 120% since its IPO last November! That reminded one follower of the topic of this story.
... the Tesla of patio furniture. $RH 51.00+3.13 (6.54%)—
BOTD (@BuyOnTheDip) May 13, 2013
Ha! And if that wasn't enough, Buy On The Dip also had this amusing tweet about tickers and the alphabet.
FYI: $A $B and $C all hit new 52-week highs today. ($D and $E did not)—
BOTD (@BuyOnTheDip) May 15, 2013
I chided him for missing out on Ford (F), which also hit a 52-week high this week. But a more important question for BOTD is this. What have you been doing lately? There certainly haven't been too many dips to buy in this up, up and away market!