Tesla Motors (TSLA)

Tesla Motors (TSLA) is an auto company that makes electric sports cars. The big appeal is that they are environmentally friendly since they are electric. An article from Reuters (http://www.reuters.com/article/2011/05/25/tesla-idUSN2513639020110525) states that Tesla is doing an IPO for $158.5 million so that it can design the Model X SUV but they could need up to $214 million. Goldman Sachs will be managing the IPO which could be a good sign since Goldman Sachs is an aggressive brokerage firm. This article and official news was announced 5/25/2011 and there was a 8.5% jump in the stock price. Over the next two days the stock price has been drifting upwards indicating that investors under reacted when the news was first announced.

Tesla Stock Overview: Date: 5/27/2011, Sector: Consumer Goods, Industry: Automobiles & Parts, Current Price: $29.52, 52 Wk Price Range: $14.98-$36.42, Beta: 1.08, Market Cap: $2.819 B, EPS (TTM): $33.17, P/E (TTM): 0.89, EBO Valuation: -$17.86, and ROA (TTM): -62.88 which is lower than the industry, sector, and the S&P 500.

Fundamental Valuation: The fundamental value (EBO model) is -$17.86 which indicates that the stock is overvalued. The EPS forecasts for the next two years are negative based on the data from Reuters. The reasoning for negative forecasts are covered below under the recommendation section.

Technical Analysis: The technical analysis on Tesla is bearish. All technical analysis has a three month timeline. The Bollinger Bands have a 50 day moving average and a 2.5 standard deviation. The Bollinger Bands have a neutral/bearish indicator. The stock price has been riding between the upper band of $31 and the moving average 0f $26. The stock price is getting close to the $31 mark but has been above the average ever since the announcement of the IPO for the new SUV model. It can be neutral if there continues to be an upward drift due to the recent news of the IPO. However if the stock price continues to get close to $31 there should be a downward movement in the stock price.

The stochastic is a neutral indicator. The %K is greater than the %D which is a bullish indicator since the gap is increasing between the %K and the %D. The %K is greater than 80% which is a bearish indicating that the stock is overbought due to the excitement of the recent news about the IPO.

The moving averages are bullish because the stock price is significantly higher than both the 25 day and the 50 day moving average. Both averages have a positive slope which is also a bullish indicator since they have been increasing for almost two months.

The MACD is greater than zero meaning that the short term moving average is greater than the long term moving average signaling upward pressure on the stock price. The MACD is also above the 15 day moving average which is another bullish indicator.

The linear regression is a neutral indicator. The linear regression has a positive slope which is a bullish indicator since it shows that the price should continue to increase. The current stock price is above the linear regression which indicates the stock price should come back towards the linear regression line.

The 100 day momentum for Tesla has a slope close to zero which is a neutral indicator. The momentum is above 100 which is a bullish indicator. The past momentum has been over 100 but recently went far below 100 to about 75. The news about the IPO has added some momentum but it is unknown how long this momentum will last.

Overall the technical analysis shows that the stock price is over its average due to the news of the IPO. It seems the stock will continue to rise but is over heated and will have slower growth in the future. The stock price is however drifting upward suggesting that investors have undervalued the IPO.

Recent News: The most recent news was the IPO that was mentioned above. This IPO will add funding that will be used to design an electric SUV which will be the third model for Tesla.

Recommendation: S-Buy / L-Hold / Day Trade-Buy Tesla’s price is volatile but the stock price is overvalued. After researching the company it is obvious that the company needs more research and funding to become sustainable. After watching Top Gear (http://www.youtube.com/watch?v=5ZaP6GseAUQ) and looking at other websites including the official Tesla website it seems the cars are of poor quality and are overpriced which is basically a bad value for consumers. There are two main models of cars and you can get a racer version of the roadster. The cars range from $80k to $130k. The cars are basically a copy cat of the Lotus Elise with the exception of one being electric and one being gas powered and with the Tesla being three times the price of a Lotus Elise. The Top Gear video had two Tesla Roadsters and they both broke during the test drive. Tesla claims the car will go 200 miles and during the test it only went 55 miles. Also note that it takes 16 hours to recharge the car.

I would recommend day trading this stock with the proper information due to the volatility hype behind the company. I agree electric cars that are fast and sporty is a great idea but making them a dependable product that has a positive value for consumers is going to be a challenge. It would also be a good investment for the short term of about a year. I think the company has a long ways to go before it will become socially accepted by US consumers. On the other hand I might be wrong and this might be the next great company and investors might want to get in before it takes off. I personally would not recommend buying this stock at this time for a long term investor. I gave it a hold recommendation for the long term instead of a sell because the company is still growing and if new information becomes available about a better consumer value it could become a great buy.