Tesla Motors Inc (NASDAQ:TSLA) Short Still in Play at Stock Traders Daily
Stock Traders Daily issued a short recommendation on Tesla Motors Inc (NASDAQ:TSLA) when the stock was near $254. This short recommendation was issued through Reuters, First Call, Zacks Institutional Research, and to subscribers of Stock Traders Daily specifically (subscribe). Shares of Tesla have since declined by approximately $14.00, but our price target is meaningfully lower than that so we are maintaining our recommendation and persons engaged in the short side of this trade from our levels should maintain their position according to our observations.
Ours is a value driven approach, so a short recommendation here can be construed as derived from our observations of value, or lack thereof. According to our observations shares of Tesla could be fairly valued at the end of 2017 at current levels, assuming revenues come in as planned.
There's no reason to believe that revenues will not come in as planned, demand for new products seems robust, but the shares have already priced in that growth.
This is a valuation observation, so it has everything to do with the multiple as well. At the end of 2017, should everything go according to plan, the PE multiple of Tesla will still be 72 times earnings, but at that point we would also consider that multiple to be extremely rich. Therefore, the probability of a multiple contraction over the next 1.5 years is high.
Our macroeconomic observation, which is called The Investment Rate, measures the rate of change in the amount of new money available to be invested into the stock market over extended periods of time, dated back to 1900 and extending ahead to 2040, and it tells us that multiple contractions are something that we should expect from the stock market in general, and stocks that are already richly valued are likely to have more severe contractions. We believe Tesla fits that bill.
Long Term Trading Plans for TSLA
May 2, 2016, 9:19 am ET
The technical Summary and associated Trading Plans for TSLA listed below will help you make important timing decisions for your trades. This data is based on our proprietary analysis for TSLA. In addition we offer Market Timing Models and Stock Filters in the links above which may increase the proficiency of the decisions you make.
TSLA - (Long) Support Plan
Buy over 210.50 target 265.27 stop loss @ 210.24.
The technical summary data tells us to buy TSLA near 210.50 with an upside target of 265.27. This data also tells us to set a stop loss @ 210.24 to protect against excessive loss in case the stock begins to move against the trade. 210.50 is the first level of support below 240.76 , and by rule, any test of support is a buy signal. In this case, support 210.50 is being tested, a buy signal would exist.
TSLA - (Short) Resistance Plan
Short under 265.27 target 210.50 stop loss @ 265.53
The technical summary data is suggesting a short of TSLA as it gets near 265.27 with a downside target of 210.50. We should have a stop loss in place at 265.53 though. 265.27 is the first level of resistance above 240.76, and by rule, any test of resistance is a short signal. In this case, if resistance 265.27 is being tested, a short signal would exist.