Could Tesla See A Short-Term Rally? Here's A Technical Breakdown

Tesla Motors Inc TSLA shares have gone from being the darling of the Street in 2014 to being a disappointment thus far in 2015. The company has one of the coolest toys around for the big money consumer. But is the ongoing investment in new designs and more capacity too much of a burden for a still-young firm?

Let's take a look at the numbers and the chart to see where Tesla may be headed.

What The Bulls See

• A visionary leader that is investing shareholders' money in cutting edge technology.
• Some reasonable valuation metrics: A P/E of around 45 based on next year's consensus estimates, which looks great when compared to estimated revenue growth of 52.4 percent, and estimated EPS growth of over 300 percent and an enterprise value of $25.73 billion that slightly trumps the market capitalization of $25.10 billion.
• A decent short-term balance sheet position, despite long-term debt that seems onerous (current ratio of 1.48).

What The Bears See

• Very pricey valuation metrics: The P/E of 45 which is twice that of the broader equity market (making nearly perfect execution a must), a price-to-sales ratio of 7.76 and a price-to-book ratio of 27.20.
• Negative profit margins and cash flow.
• A company that is levered to the hilt: More debt ($2.54 billion) than cash ($1.91 billion) and total debt-to-equity of 278.65 percent.

The Technical Take

Technicians note that Tesla shares are drastically underperforming the NASDAQ of late and could be setting up for a bearish "head and shoulders" top in the near future. Right now, they note that Tesla could actually bounce from just under $200 to possibly up to $246.21.

If a rally in Tesla stopped in the $246.21 to $265 range, it would form out a "right shoulder" on the weekly chart. The next move after that, in theory, would be a tumble back down to the "neckline" support at $182.25. If that level of support fails, the formation would be confirmed and the downside target would then be $117.93.

Overall

With very pricey valuation metrics and a potentially treacherous chart formation playing out, it seems wise to tread lightly on the long side in Tesla.