Trade of the Day: Grossly Overpriced TSLA Stock About to Turn Down

Advertisement

Tesla Motors Inc (TSLA) — This manufacturer of high-performance electric vehicles has no doubt changed the automotive landscape. And after seven years of losses, the company is expected to turn a profit this year. However, S&P Capital IQ recently cut its 2014 earnings estimate in half to $0.58 per share. Its analysts also reduced their 2015 EPS estimate to $2.89, down from a prior $3.33. Their 12-month target price is $245.

Last week, the company delayed the release of the highly anticipated Model X SUV until the third quarter of 2015, which could have a negative impact on earnings in the short term.

At a current price of $251, TSLA stock is selling at a price-to-earnings (P/E) ratio of 364 times this year’s estimates and 83 times 2015 estimates.

This grossly overpriced stock has been having difficulty poking through its 50-day moving average, now at $250, even though it managed to close Tuesday at $251.08. It has been trading in a very narrow range between $228 and $250 since falling from a high over $291 in early September.

MACD is in the bull zone, but barely, and buyers and sellers have been at a standoff since October when a downside gap opened at $245.89 to $254.40. My estimate is that the gap will close, as shares only need to move about 3 points higher.

Sell TSLA stock short at $255 with a downside objective of $225, just under its 200-day moving average. Short selling is a speculative technique and not suited for all investors. Check with your broker for any special requirements on borrowing this high-priced stock.

TSLA Stock Chart
Click to Enlarge

Chart Key


Article printed from InvestorPlace Media, https://investorplace.com/2014/11/trade-day-tesla-motors-inc-tsla-stock/.

©2024 InvestorPlace Media, LLC