This is a company that was labeled a “loser” by a presidential candidate and was derided for some time by investors because of its debt and the uncertainty of the electric car market.
That’s all changed with the stock’s stunning surge so far this year—up a whopping 325% year-to-date with few signs that the momentum is over.
I’m a car guy and I love cars that go fast, almost as much as I like stocks that go fast!
So I was understandably interested when Tesla flipped to a “buy” in my Portfolio Grader rating system in April due to the stock’s quantitative buying pressure.
Buying pressure is one of the real keys to our success. It refers to how much the institutions are buying a stock, or where the big money is going at any given time. Typically, the more attractive a stock is to institutional investors, the better the stock will perform in the near term.
Of course, with this type of run, it doesn’t take much for momentum investors to flip the switch between “bull” and “bear.” Just ask Netflix (NFLX)!
If buying pressure is all that is sustaining a stock and it suffers a reversal in sentiment, we could see Tesla drop much like Netflix did. Fresh off a 340% run through 2010, NFLX’s share price collapsed in the summer of 2011, shedding some 80% of its value over the next year until in 2012 the switch “flipped” again and the stock has gone on another 370% run. Whew!
And there are still plenty of folks short the stock who think that the Tesla bubble is going to burst.
But so far, Tesla has been able to sustain its do-no-wrong rally that the stock has enjoyed since the beginning of April. And now the chips are all out on the table as investors wait for the car company to announce earnings Wednesday after the market close.
Analysts are currently looking for the company to report a 17 cents per share loss on revenues of $383.4 million, and if the company is able to beat these relatively low expectations we could see yet another surge in TSLA shares.
Personally, I’m sitting on the sidelines for this one, but my Portfolio Grader system ranks the company as an A-rated buy based purely on the stunning levels of buying pressure that we’ve seen in the stock.
What do you think—are you playing this high-flying car company? Let me know your opinion in a Facebook comment on our page.