Could Tesla Motors Inc Stock Be Headed For Double Digits?
Tesla Motors Inc (NASDAQ: TSLA) shares have distanced themselves from the $200 area since January 25. On that day, it peaked at $203.57 and sold off to the end the session at $193.56.
It did make one attempt on Monday to clear that important psychological technical level, but was was turned back at $199.52. In Friday's session, it can't find a bottom, continuing to make new lows for the day.
But even if it does rebound, is it only a matter of time before it crashes and burns and falls into double digits? For those Tesla bulls that want to dismiss this thesis as hogwash, let's take a gander at what's happening.
Around The Market
Many former high multiple or issues with exorbitant price-to-earnings ratios are being slaughtered. Investors are instead flocking to high-dividend cash cows such as AT&T Inc. (NYSE: T) (higher by 7 percent in 2016) and Verizon Communications Inc. (NYSE: VZ) (higher by 10 percent). Many utility stocks have also had impressive rallies.
Was is out of the question prior to its Q4 earnings report that LinkedIn Corp (NYSE: LNKD) would be trading near double digits?
Of course it was. With a close of $192.28, how bad would the report have to be cut the issue in half? Its Q4 beat with slightly better revenues was not the problem. However, the company slashed its FY 2016 EPS and sales guidance. The rest is history. At this time, it has found intra-day support at $110.01 and rebounded towards $120.
Along these lines, Tableau Software Inc (NYSE: DATA) is undergoing an unannounced 2-for-1 stock split in Friday's session. It fell from Friday's close ($81.75) to as low as $40.04 before bouncing back into the mid-$40 handle.
The culprit here was a huge Q4 EPS beat with slightly better revenues, but a miss on licensing sales, a sign that customers are abandoning products in favor of its competitors.
The fundamentals, which have never been Tesla's strong suit, are much worse than the two aforementioned issues. Whereas LinkedIn and Tableau Software have been able to have strings of profitable quarters, Tesla has been unable to do so. Its EPS has worsened in each of the past four quarters, from Q4 2014 loss of $0.13 to a loss of $0.58 for Q3 2015.
The technicals in Tesla also warrant caution.
Inspect the charts of many of former momentum stocks that have monster runs over short periods of time and then begin to retreat. Look back to the bubble of all bubbles -- the dot.com bust in 2000 -- and see how quickly many issues wiped out months of gains in a few days.
With respect to Tesla, there have been a few monster runs that have left huge voids in price action. The one with relevancy to its current price levels relates to the run from November 2013, when the issue bottomed at $116.10 then went to $265 by February 2014.
Since that time, it has incurred dips under $200 only to recover back towards and above that initial surge, with the eventual all-time high being made in September 2014 at $291.42.
Now that it has lost the $200 level with a vengeance, what will be the catalyst for push towards double-digits? Its Q4 earnings report on February 10? In view of how similar high multiple issues have performed lately, they're going to not only need a solid beat, but inline or higher guidance must accompany that report.
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