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Don’t buy yet – these stocks have further to fall

Tesla (TSLA)

Fallen: less than 2%                Consider buying after: 50%

I feel I’m being generous with Tesla. I’m willing to concede that despite huge losses and a demonstrable penchant for costly nepotism, the company is poised to become an earner in the near-term, and an important company to the American economy in the long-term. For that reason, I give the company a very-rough, ballpark estimated value of $20 billion. As I said, it seems generous to me, and why wouldn’t it be? After all, I’m a self-proclaimed fan of Elon Musk and a believer in green technologies. I was also bullish very early on Tesla, and the call helped me establish my legitimacy in this business. Though I bought TSLA puts at the same time I bought BABA calls, I have since sold both. This call isn’t personal or emotional — quite the opposite.

Still, when a company that should be valued at $20 billion is valued by the market at $60 billion, it becomes extremely likely that it will be valued at $30 billion at some point in the future, and almost surely before it is valued at $120 billion? Wait… $120 billion? Oh, hadn’t you considered that? To double your money in TSLA (and if you want less than a double, wouldn’t you invest instead in something more conservative), the stock price has to rise to $750 per share. It has become so expensive as to wash out the future value of even spectacular present gains.


Chart courtesy of www.stockcharts.com

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Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.