Tesla Motors: The Trade on Politics…
|Written by GSCR Staff|
|Wednesday, 02 March 2016 06:53|
Super Tuesday is now in the books and we appear to be closer to knowing who the nominees will be for both parties. For the Democrats, Hillary Clinton has faced a greater than expected fight from Bernie, but appears to be pulling away. If email-gate will prevent her from running or hurt her in the general election remains a major question. On the GOP side, The Donald appears to be running away with it, but has more work to do than Mrs. Clinton. Ironically, some of his fiercest opposition comes from within his own party. Why are we bringing up politics? Well, as we all know, the markets are no doubt affected by politics and understanding how Wall Street is forecasting the election will help us formulate some winning strategies. And the current uncertainty could be a cloud hanging over stocks as a result. But, we digress.
In Monday’s Goldman Guide we mentioned that technology appears to be an undervalued sector. Well, today’s pan is both a technology play and intricately weaved with the government. While out of our small cap space, we have featured Tesla Motors, Inc. (NASDAQ – TSLA - $186.35) periodically.
Consider it our bellwether on Obamanomics if you will. The left will applaud the government funding of the Company as necessary to combat global warming with the reduction of fossil fuels. The right will combat that sentiment with the argument that the Tesla is the epitome of the ‘evil’ in government intervention in the free market. The Company’s products have a very high sticker price unaffordable to most people; however, there is no need for efficiencies as more tax revenue can be diverted to the Company to meet costs. No matter how you feel about Tesla from a political perspective, the stock has been fascinating.
TSLA 2-Year Chart vs. SPX and IWM
The very busy chart above illustrates the two year stock movement for TSLA versus the S&P 500 in purple and the iShares Russell 2000 (NYSE – IWM) in orange. TSLA is down 27% over that time, while IWM is down 12% comparatively, and the S&P 500 is actually up 6%. The saving grace for TSLA that can be observed in the chart is the oscillation which has been right around the 200 level makes the stock and excellent trading vehicle in the satellite portion of a core-satellite model.
Yesterday, the stock was hit on a nearly 3% downturn with a tweet that Citron Research was shorting the stock and expected it to drop to $100 this year. On the plus side, EPS is forecast to get into the black in 2016 and grow 200% from 2016 to 2017.
Demand for Tesla Motors automobiles will definitely be impaired if the sustained price depression for oil continues, but not materially so. Plus, we do not believe that the election of Hillary or Donald will affect the TSLA model going forward. Therefore, we believe that the stock is a great trading play for short term gains. Buying calls or some other option strategy would be ideal, especially if the shares drop to the $175 level. Utilize a targeted sale price of $250.
Have a great day!
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