Courtesy of Benzinga.
Tesla Motors Inc (NASDAQ: TSLA) built up investors' hopes big time leading into the rollout of the new "D" version of its already popular sedan. The product may be a long-term success, but it failed to live up to the hype on Friday.
In all fairness, nothing short of an announcement that Tesla discovered a bottomless gold mine at the company's headquarters might have helped the pricey Tesla shares withstand the broader market's selling pressure on Friday.
So, does Elon Musk's baby have what it takes to justify the lofty valuations currently built into the Tesla story? Here's a look at the fundamentals and technicals of the company and the stock to get a feel for the Tesla story.
The Fundamental Picture
Tesla sports probably the most speculative fundamental pictures out of all of the high-beta, go-go stocks trading in the markets. While others like LinkedIn, Netflix, Facebook and others all sport very high valuation metrics, those stocks also are nearly all sporting positive levered free cash flows and very impressive balance sheets. Tesla, however, is a company that is in a much earlier stage of growth than most of those companies.
Tesla is funding much of its very impressive growth initiatives with debt offerings, in addition to its cash on hand. Its balance sheet is not as pristine as a result, with a debt-to-equity ratio of 257.33 percent. Tesla does have positive operating cash flow of $286 million annually, but its levered free cash flow is still in the red on an annual basis.
Valuation-wise, Tesla is right there with the social media plays with a price-to-earnings ratio of 70. That high headline P/E is tempered somewhat by the fact that Tesla's revenues and earnings are expected to grow at 59.7 percent and more than 200 percent, respectively.
The Technical Take
Tesla's stock is experiencing some short-term difficulty following the negative reaction to the new product announcement. Technicians note that the stock (last trading just under $237) has important uptrend line support at $232.50. The stock, as well as the broader market, may bounce off of that key support just below Friday's close. The first key resistance for Tesla will come in at the upper edge of Friday's downside gap at $257. That bounce, however, could lead to even more downside.
Tesla is likely, if the company continues to execute, going to be a long-term winner. With the stock already at lofty levels, however, the big question is whether jumping into the stock is going to be a winning move in the short-term.
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