How To Buy Tesla Stock And Not Lose Your Shirt…DON’T!

How To Buy Tesla StockThis is all about how to buy Tesla stock the right way.  It seems that many people are jumping on the Tesla bandwagon once again and you know what that means…opportunity.  There are a few ways to play this stock, but only one that is screaming right now.  That is to play the short on this one. Give it until Tuesday because of the appreciation in price I expect to see on Monday’s trading session, then grab your a small short position.  It can’t help but to go up and have the public jump all over this after the press releases this weekend.  But that means nothing but good things for us when we short this.  I expect a pretty good gain on this stock Monday and possibly a smaller gain on Tuesday before the shorts start to take over.  So my entry point would be sometime Tuesday or into Wednesday.

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Take a look at the chart down below and you will see the last 30 days have been very good to Tesla stockholders.  The stock price has risen a little over 21% and seems to be flattening out.  With all the current news about pre-orders, it gives us a great chance to take a short position on this over bought company. There is a ton of hype about this new vehicle and the news is blasting it everywhere.  This is one of the main factors in everyone jumping on the bandwagon.  Keep reading and see why the long position is a very risky play and the short a more likely case for earning a decent return.

How To Buy Tesla Stock

When I look at a company to invest in long, I like to use fundamentals in buying it.  In other words, I like a company to actually earn a profit and not be in debt over their eyeballs.  Looking at Tesla, they seem to fail both of those prerequisites quite handily.  This company recently released the report about normalized free cash flow being negative $660 million for the most recent quarter.  They have also spoken about the Model 3 that will be coming out.  They are well known to be losing money on every car that they will see at the $35,000 level when it finally does hit the stores.  So until then, I expect sales to drop while everyone is waiting for the Model 3 to come into full production.  Back to the original question of how to buy Tesla stock?  Answer…you don’t, unless you have money to burn.  Take a look at the short interest increasing as more investors become wise to their money losing ways below.   Funny how it is at an all time high when the press can’t do anything but sing their praises.  Reminds me of the housing during 2007-2008.  Remember that those that don’t learn from the past are doomed to repeat it.

How To Buy Tesla Stock



Now for the crazy part of the story regarding this company’s share  price.  Take a look at the following chart and see where it began and where it is now.  Watching a stock grow from about $19 a share to over $237 a share that makes you think that it will never stop.  During all those years, they continued to fail in producing a profitable vehicle and the stock price somehow was rewarded with more appreciation.  They have been fortunate to have an abundant flow of cheap money that they were able to access.  No doubt that the bondholders will be selling off many of these vehicles in order to get pennies on the dollar for their investments.



Does everyone realize that the company lost on average $18,400 on every single Model S that they sold?  And yet the stock continued to increase.  It created a bubble that I have not witnessed since the great housing bubble of 2007.  This is screaming… SELL ME SHORT!  Ask yourself this questions, if they lost 18 grand on each of the Model S cars and sold them for quite a bit more than $35,000, how are they going to make a meaningful profit on the Model 3’s?  They are not and that means more financial misery for the company.  They are currently about $3 billion in debt with a company value of $32 billion.  The one thing they have got going for them is that they could sell additional shares of stock at this level to sustain themselves for a period longer.  But when the next recession hits, and it will hit soon, Tesla will be looking like a good candidate for chapter 13 protection and that stock will look more like it should at a near zero.  How to buy Tesla stock the right way?  Well, I would be shorting it all day long.




How does the future look for Tesla?  The reports out there put Tesla needing about $15 billion to stay in operations for 5 more years.  It looks like they will definitely need it more sooner than later with the loses they are taking on each vehicle they sell.  Even Forbes wrote about the idea of shorting Tesla stock, which I am in agreement with.  There are many people like myself who are wondering how a company that is losing money hand over fist is not just avoiding bankruptcy, but actually watching their stock go 11X the price it had just a few years ago.  Like I said before, it is one of the largest bubbles I have had the pleasure of watching grow in my 20 years of investing.




Now on to the good stuff.  We need to pick a good entry point to short this stock and like they say, there is no better time then the today to get into the action.  The press has been hammering us with great loving stories of how wonderful Tesla is and how the new Model 3 is going to revolutionize the world of automobiles.  The problem is that I don’t believe in fairy tales, I believe in profits.  A company cannot stay in business forever if they never make a profit.  And I cannot see Tesla making a profit in the next 5 years.  This means more downward pressure on the stock for the long run.  I think given the overall market growth recently, and the mostly positive imagery that the press is giving Tesla, it is the right time to short it.  This is how to buy Tesla stock the right way…by shorting it.

This stock is overvalued in my opinion and has yet to earn a profit.  The future does not look any better for the next line of Model 3’s and thus neither does their financial well-being.  I would say that we will be testing that bottom we reached in February once again in the next quarter or two.  This is not one of my more famous shorts, such as the recent GNCA position that made my readers thousands upon thousands of dollars.  This is a more long term play, as the stock has a ton of friendly articles being written about it to keep the investment dollars flowing.  But that will end abruptly, and when it does, we will be sitting poolside enjoying another well thought out investment gain.  How to buy Tesla stock?  Don’t, just short it and enjoy the extra money you will earn.

How To Buy Tesla Stock

Comments

  1. Joestock says:

    Right on with Tesla so far. I’ll bemail surprised to see it go up another 10 percent.

    • Stock Moe says:

      And now it is down big time in the after market. Not that this is a predictable thing, but it seems like it.
      Thanks for writing…Stock Moe

  2. Went short on this at close. I agree with your assessment of this being a dud. Time will expose the massive loss eventually.

    • Stock Moe says:

      Don’t be surprised to see this stock start to drop by large clips of 3-5% on a daily basis until it gets back to below $200.

      Thanks for writing…Stock Moe

  3. Rodrigo Ortiz-Monasterio says:

    Thorough analysis of an extremely overvalued cult stock.

    • Stock Moe says:

      Thanks Rodrigo, can’t agree more with you. There seems to be many people forgetting the fundamentals of what makes a good investment, which is profit. This company is losing money hand over fist in the hopes of “tomorrow” being a brighter day. I’ll short it. Thanks for writing…Moe

  4. One more misleading point that constantly gets spread around is the perception that the Model 3 is “cheaper” than GM’s Bolt after the $7,500 tax credit. Aside from the fact that the Bolt is not targeting the same demographic, imo (family hatchback commuter vs. luxury EV), the discount only applies to a maximum limit of 200,000 vehicles under current law and you had to have paid $7,500 in taxes in the calendar year. Many don’t pay that much. Tesla also only delivered a total of 50,580 vehicles in 2015 and only 14,820 in the first quarter of 2016. The previous Model S and X required a heftier $5,000 deposit to preorder vs. the small $1,000 deposit required to order the Model 3. Somehow I doubt even half of the 300,000 will actually commit to the sale given the wait time and the fact that Tesla would need to double production year over year until 2018 to meet this perceived demand if you were to assume all those buyers will commit by then.

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