The Tesla Bubble Visualized

Cult stocks are great investment vehicles on the way up, but many retail investors make a deadly mistake sticking around when the party is over. Don’t fool yourself, Tesla is no different. Take a look:

TSLA revenueTesla’s EBITDA is negative … hence why the value above is blank. Let me put this into perspective: Tesla is trading over 130x next year’s earnings YET its earnings before interest, taxes, depreciation and amortization is negative! Giddy up and buy!


TSLAThe rise of Tesla’s stock in 2013 was a mix of short covering, momentum chasing and a huge jump in ‘earnings’. Revenue in the last twelve months (or LTM, used because the current fiscal year has not yet finished) has more than quadrupled and is expected to grow 346% in 2013. Impressive right? Wrong. Most of Tesla’s earnings came from selling its zero-emission vehicle credits. But that’s the past, so really who cares. I’m looking towards the future and what do I see? Trouble.


TSLA #2Tesla’s future expectations are eye-popping: analysts expect the company to not only get their EBITDA positive in 2014, but for EBITDA to increase to $213.75 million. Revenue is forecasted to balloon to $2.3 billion, a 458% increase in just two years! So it all comes down to one question: are you a believer in miracles?


The Technicals:

TSLA ChartTesla trades really well using Fibonacci retracements/extensions. Since it’s trading in uncharted waters, this is really the only indicator that correctly predicts overhead resistance. It’s important to watch volume around these levels. Good luck!


PS: Momentum stocks work best during market strength. Once the market loses steam and begins to correct, usually these types of stocks fall fast and hard. I want to be clear that I believe Tesla is a great trading vehicle, but not a good investment.

Questions? Comments? Leave me a reply.

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    1. That’s not an easy thing to do. The only thing you can do is watch for a breakdown (with big volume). Tesla told investors that they don’t expect to make a profit this year, yet the stock continues to rise. It’s hard to go short because people are being patient with the company. If you’re long already just ride the wave until: 1. the overall market environment changes (momentum stocks don’t perform well during market corrections) or 2. you’re satisfied with your gains. Trying to time the decline of this stock is dangerous.

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