3 Reasons to Stay in/Buy TSLA Stock
Technicals: Tesla’s push through the $190 area puts it through a ceiling and into uncharted territory, which tends to be a favorable development for the bulls. Granted, this ceiling isn’t a particularly strong one — TSLA stock only reached this area once before, in late September 2013, before tumbling 35%. Still, if you’re looking for a short-term positive, this is it.
My Original Thesis: You can take a little comfort in TSLA stock trading for such outrageous valuations because Tesla really does have explosive growth potential. You can see the full argument here, but in short, Tesla is being navigated by Elon Musk, who will probably go down as one of the greatest hybrid tech-business minds of our time; Tesla’s currently small scale allows for incredible growth projections; and Tesla builds a phenomenal product that not only has an established cult following, but the praise of mainstream auto media. That’s not a guarantee of success, but I’ll take it as a firm gentleman’s handshake.
More International Optimism: Much of the projected growth is expected to come from the United States, but the recent surge in TSLA stock has come on sunshiny thoughts about Tesla’s prospects in Europe and China. Specifically, Tesla is pushing for its Model S to be included under China’s subsidies for electric vehicles — subsidies that will be much larger in the next couple of years than previously expected as the country battles extensive pollution. Moreover, Musk also said last month that he believes Chinese sales might compare with U.S. volume as early as 2015. Meanwhile, Tesla’s European expansion has already begun, with European deliveries accounting for 18% of sales in Q3, and the company is building out its Supercharger network on the continent. Europe currently has 14 Supercharger stations, and Germany is especially well connected. Via Tesla:
“By the end of March 2014, 50 percent of the German population will live within 320km of a Supercharger, and 100 percent of the population will be covered by the end of the year.”
I backed TSLA stock for this contest because I do think it will be one of the best stocks of 2014 (and frankly, beyond). But that doesn’t mean it’ll be a straight line all the way to the finish.
The fact that Tesla has already run up like it has against a down market almost makes me nervous — it’s a rare big winner amid a host of big losers, and I think it’s ripe for the picking should the market continue tailing south and fund managers look to offset some of their paper losses.
So what should you do? It depends on your risk tolerance. I’m taking partial profits soon. If nothing else, I’d at least suggest setting stop-losses on at least part of your position in case TSLA stock does reverse course in the coming months.
But I certainly won’t be abandoning ship completely.
Kyle Woodley is the Deputy Managing Editor of InvestorPlace. As of this writing, he was long TSLA. Contact him at @KyleWoodley.