Don’t Short Tesla (TSLA)

The shorts are getting burned on Tesla (NASDAQ: TSLA) . . . again!
The current momentum stock king is zooming higher on Thursday after a very upbeat earnings report.
On Wednesday after the market closed, the upstart car company reported a loss of $16 million, but revenues jumped 43% over the prior quarter.
In addition, Tesla said it plans to deliver 35,000 Model S vehicles in 2014.
Morgan Stanley, noting Tesla’s  success, basically called the company the most innovative  in the sector.
Tesla is more than that. It is an innovator in both manufacturing and technology and as such, it  can be a transformative company.
The hyperbole around Tesla’s success gives the story enough legitimacy to make investors giddy.
Until the company stumbles, the stock will only go higher.
Comparisons to other auto manufacturers do little to help assess the validity of Tesla’s market valuation.
Today’s move in Tesla brings the market cap of the company to nearly $26 billion. By comparison, General Motors (NYSE: GM) and Ford (NYSE: F) have market caps of $58 billion and $60 billion respectively.
Tesla is gaining ground, and if the current pace continues it will surpass those companies before you know it.
Fundamental valuation metrics just don’t work on Tesla.
Doug Kass of Seabreeze Partners pronounced that he was short Tesla shares in advance of earnings.
The company had hit a speed bump in the form of highly publicized fires in its vehicles, but had recovered any lost value — and then some — heading into the operating report.
Kass is losing big time on that bet on Thursday, and yet the shorts are likely not going away any time soon.
Flat-out the stock is expensive. The problem is the story has just enough probability that buyers dominate the stock. Hot money keeps pouring in with every piece of good news.
Take China, for example. Tesla CEO Elon Musk noted that demand for the Model S in China may go unmet. In other words, the company cannot make the cars fast enough.
And what about recent stories about Tesla joining forces with Apple (NASDAQ: AAPL)? One can conjure images of electric cars powered and run by computers built by Apple.
These stories are not too dissimilar to what took place with Amazon.com (NASDAQ: AMZN). Amazon was a game-changing business and it, too, faced competition from existing players in its original business of selling books.
Eventually the company became so much more, leaving those companies in the dust.
The same is likely to happen with Tesla. As such, you cannot be short this stock, now or the foreseeable future.

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