Investment Contrarians

One Sports Car Stock That’s Shocking the Market

By for Investment Contrarians |

Car StockA year ago, I was able to take a close look at a cool-looking electric-powered sports car. I even got to sit in it. I noticed that it was not made by a manufacturer that I had recognized—it was built by Tesla Motors, Inc. (NASDAQ/TSLA), but I really didn’t give it a second thought.

Well I wish I had now, as Tesla is seeing its shares supercharge on the price chart, up 70% in the first few weeks of May and 167% so far in 2013, based on my stock analysis. Tesla is up a sizzling 198% over the past 52 weeks compared to the S&P 500’s 23% increase.

My stock analysis suggests that the maker of the sharp-looking electric sports car has really shocked the stock market with its superlative price appreciation. Who would have known?

Tesla Motors Inc Chart

Chart courtesy of www.StockCharts.com

I thought Tesla was interesting and gimmicky in some ways, but never in my wildest imagination did I expect the stock to surge as much as it has.

According to my stock analysis, you can thank the short-sellers for running to the exits and unloading their positions in a classic short squeeze. At the end of April, there were 27.5 million shares of Tesla shorted. The share price was $53.99. Fast-forward 10 sessions, and the price has surged to over $90.00.

Now you can’t blame short-covering for all of the increase in the share price. Tesla did deliver some awesome numbers that tore apart Wall Street’s estimates, according to my stock analysis.

In the first quarter, Tesla sold 4,900 vehicles. That’s it. By comparison, General Motors Company (NYSE/GM) sold 237,646 in the month of April alone. For the entirety of 2013, Tesla expects to sell just over 20,000 vehicles. General Motors (GM) will sell over two million.

My stock analysis suggests that the growth in Tesla is strong, with sales up 83% in the first quarter. While the small quantity makes me shake my head, the company is estimated to turn a small profit in 2013 and earn $1.04 per diluted share in 2014, according to Thomson Financial.

Tesla is estimated by Thomson Financial to see its revenues grow 366.5% this year and 31.7% in 2014. Again not bad numbers, but they’re not supportive of the share price and valuation, as my stock analysis indicates.

Consumer Reports does love the Tesla “Model S” sedan that was assigned a score of 99 out of 100.

Now, if you base the share price of Tesla purely on valuation, it’s clearly out of whack versus both GM and Ford Motor Company (NYSE/F), as you can see in the table below.

Tesla GM Ford
Price/Sales 10.7X 0.28X 0.4X
PEG Ratio 27.96 0.62 0.97

But Tesla is trading based not on valuation but on potential. Yet even based on potential, the company is way overpriced, based on my stock analysis, which makes the stock tempting.

Of course, the current short sellers have paid dearly, but the stock was at a much lower price. At nearly $100.00, it may be time to get in on some of the action, but on the short side.

The chart may indicate upward movement in the stock, but my stock analysis indicates it’s more likely to move downward in the near term.

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