Tesla Motors Inc (TSLA) — Despite rave reviews for its high-performance electric vehicles, Telsa has yet to make a buck.
Sales jumped 158% in 2014, and analysts project a 50%-plus gain in revenue this year. But as production ramps up for the new Model X SUV, costs are expected to rise from lower government subsidies. Additionally, a stronger U.S. dollar should squeeze margins from international sales.
S&P Capital IQ expects an adjusted loss of 67 cents per share this year but sees the company turning a profit of $2.50 per share in 2016. However, this assumes low or no competition from larger automakers. Furthermore, TSLA stock is selling at a forward P/E ratio of 96 times 2016 earnings in a stock market that is critical of high-P/E stocks.
While Capital IQ analysts believe the company’s recent offering of 2.1 million shares of new stock will provide enough cash to operate through 2016, they rate TSLA stock a “sell” with a $225 price target.
From early April to July, TSLA stock rose from under $200 to over $285. Shares then declined back below $220, smashing through both their 50-day and 200-day moving averages.
TSLA stock appeared to bottom on Aug. 24 with the broader market and form a deep “V” reversal. However, the reversal failed to gain traction and TSLA stock reversed again, plunging below its 50-day moving average.
On Thursday, my proprietary indicator, the Collins-Bollinger Reversal (CBR), flashed a major sell signal. Immediate support is at the 200-day moving average at $231 where shares could gain some support but will more likely slice through it.
Sell TSLA stock short at $240 with a price target of $200 for a short-term gain of 17% by mid-November. Protect against potentially unlimited losses by entering a stop-loss order at $275. As with all short sales, ask your broker if there are any special restrictions.
