Tesla Inc (TSLA)

Right now is a great time to be in the automotive sector. Automotive stocks, including automotive parts manufacturing, tend to do well between now all the way through to mid-April. The recent weakness was attributed to a downgrade by an analyst, and it dropped to its 50-day moving average, but nothing significant indicates a reversal of the uptrend. Take advantage of the weakness and the positive trend, and play higher. (See Top Picks.)

Just downgraded today by Goldman Sachs. It is something he does want to own and plans on getting into it at some point, but wouldn’t buy it in a downtrend, or anywhere in this area right now. Wait for the stock to break through about $280. That would break it out of a four-year sideways trend. Seeing it at $280+ for some consistent period of time, would give you a sort of “all clear” on the stock, and it could be very, very interesting.

As a value investor, he would never own this. It has no earnings and no value. With this company, you are buying a long-term concept stock, and the concept is electric cars and lithium batteries. His question is, is electric vehicles the way things are going to go. Probably in the long run. His 2^nd question is will this company be a market winner in that period or are the big guys that are currently out there going to dominate the electric business, and this one is going to have to roll over and go away. Because of this, he would not be investing in this.

Doesn’t think this has a sustainable business model. There are 2 parts to a car, design and battery. The battery is common sense and there is nothing proprietary about it. By building their giga factory, they have brought their costs down as much is they possibly could. However, it has not followed Moore’s Law. You can only make a lithium ion battery so cheap. There are a lot of upfront manufacturing costs that cannot go to zero. Then there is the style aspect, and he doesn’t see how it can compete against Mercedes-Benz, BMW, Ford, Chrysler, General Motors.

He looks at it as a battery company. There is a lot of uncertainty around this company. With a low oil price it is not as important to go on the electric side.

This doesn’t look like good value, but she looks at a stock and the company separately. This is a disruptive company, which is good for the auto industry and everybody. The stock is very rich for a company that is really making very few cars right now, and very little profit on that car. The stock really represents the incredible long-term promise of a disruptive company in the automobile industry.

(Market Call Minute.) He loves the car, but doesn’t love the investment right now. The stock is behaving poorly on concerns around their cash levels and the cost of putting it together with Solar City.

Elon Musk is absolutely brilliant, and has just announced he is not going to have to tap into the debt market this quarter. Teslas are becoming more and more standard. She is sure this will become a competitive vehicle with Ford and General Motors. Most importantly, buy this and hold it for that very long run, which is batteries. The batteries are the future. The battery business is growing. As we continue to use wind and solar, those forms of energy have to be put back and sent back to the utility.

(Market Call Minute) It is mostly about the hype.

*Short* These are great cars and Elon Musk is truly a visionary and innovator. The problem is a great car does not necessarily make a great investment. This is trading at extreme valuations. It has no EBITDA, no earnings, and no cash flow. They are going to need to raise another $2 billion this year to support their growth. Another knock is that they have recently tried to buy SolarCity (SCTY-Q), a related company which is also burning a lot of cash. He will want to cover this Short if 1) either valuations improve and they actually start meeting their targets, 2) the price momentum find a base and stabilize, and 3) a reasonable valuation.

This is not a car company; it is a technology company. It’s a wonderful product. The valuation is stretched, unless you think they are going to be able to scale the business up. That assumes that the competition is just going to sit there and do nothing. As a stock, this is highly overvalued.

(Market Call Minute.) Very expensive. Are they a car company or green energy company? Thinks investors are a little bit confused. Stock has suffered for the last little while, so this would not be a buy for him.

They have a challenge in making a change to how cars are powered. They are now going into the solar business which is always a money losing business.

(Market Call Minute.) This is not a value stock. They make no money and are actually burning through cash.

It is pricing big goals and objectives down the road. The most interesting thing with TSLA-Q is the purchase of a solar energy company. In 2012 it was the most shorted stock on Wall Street, but it turned out to do well. It is still 23% shorted now.