TSLA: Should You Bother With ‘Manic-Depressive’ Tesla Stock?

by Robert Martin | June 16, 2014 8:50 am

TSLA: Should You Bother With ‘Manic-Depressive’ Tesla Stock?

Tesla (TSLA[1]) founder Elon Musk might have made a crazy chunk of change off his company’s stock in the past year or so … but he doesn’t check how things are going day-to-day, according to a recent CNBC interview[2]. As he put it:

tesla tsla model s 185 TSLA: Should You Bother With 'Manic Depressive' Tesla Stock?“I try to avoid watching the day-to-day share price, because it’s somewhat distracting. People try to really read the tea leaves, even though there’s really not enough information to make conclusions. And then they’ll get exuberant, and then depressed. I mean, as Warren Buffett said, dealing with the market is like dealing with a manic depressive.”

The “manic depressive” description is a pretty accurate one for Tesla stock, especially of late. The company went public in July 2010 at $17 per share and, relative to recent movement, didn’t budge much for the first couple years. At the end of 2010, Tesla stock was sitting at $26.63, at the end of 2011 it was at $38.08 and at the end of 2012 it was at $33.87.

Since then, though, it has been off to the races.

The sum of all those prices doesn’t come close to 2013′s finish for Tesla ($150.43), and it’s even further off recent highs for Tesla stock.

In the first three months of the year alone, Tesla stock sure was “manic” to say the least. Shares of TSLA increased 70%, breaking the $250 mark in early March and handing Kyle Woodley an early and impressive lead in InvestorPlace’s Best Stocks for 2014[3] contest.

And that’s when we started to see shades of depression.

Tesla stock has shed 20% since that early March high and is now resting just about the $200 mark. Translate that to market cap, and Tesla has lost more than $6 billion in the past few months.

However, while a 20% drop is pretty dramatic, Tesla stock still has gained 37% year-to-date — more than 10 times the Nasdaq’s 3% gains and still eye-popping compare to the S&P 500’s gains of less than 5%.

But those feel-good gains take us right back to being depressed again, because they put Tesla stock at a level that most folks (even Elon Musk) think is a bit ambitious, if you will. As CNBC reported:

“Musk, speaking at the U.K. launch of the Model S, said there was a lot of optimism priced into the shares and the company needed to perform very well over the next few years in order to justify that stock price.”

Musk is naturally optimistic Tesla can pull it off (or at least, he has to say that), but InvestorPlace expert Dan Burrows isn’t so sure[4]. As he put it:

“As often happens with really exciting opportunities, TSLA stock is getting a “wow” premium. But there’s no way to account for exuberance. Left to conventional measures, in no way, shape or form does TSLA stock look reasonably priced over the shorter term …

Also worrisome is that TSLA stock is a momentum stock and momentum stocks are getting shellacked this year. Investors don’t want to hold these names now that the bull market is getting old. There’s a reason why utilities are having a smoking-hot year — they’re late-cycle stocks.”

So should you take a ride with Tesla stock?

If you’re prepared to deal with the manic depressive tendencies of the stock and its investors, and if you have some money to play with, you could take a flyer.

But for sanity’s sake, if you do, follow Elon’s lead and don’t get worked up about the day-to-day swings.

As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.

Endnotes:
  1. TSLA: /stock-quotes/TSLA-stock-quote/
  2. according to a recent CNBC interview: http://www.cnbc.com/id/101741918
  3. Best Stocks for 2014: http://investorplace.com/best-stocks-for-2014
  4. InvestorPlace expert Dan Burrows isn’t so sure: http://investorplace.com/2014/06/tesla-motors-looks-like-winner-tsla-stock-sell/#.U53GS_ldWH4

Source URL: http://investorplace.com/2014/06/tesla-stock-tsla-elon-musk/
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