Tesla (NASDAQ:TSLA) had an incredible and historic run last week. Euphoria and short-squeezing sent the stock to all-time highs. But at $968.99, the 52-week high, the stock’s run was not sustainable. Although the stock’s uptrend is intact, speculators who bought the stock at the all-time high will sit on losses for months, if not years.
Over 12,000 Robinhood trades apparently bought Tesla stock at elevated prices. Now that apps allow for fractional stock ownership, chances are high that these investors will be holding the stock at a loss for a very long time. Fundamentals did not support the stock’s surge to a market capitalization approaching that of Boeing (NYSE:BA). Tesla is also worth more than Ford (NYSE:F), GM (NYSE:GM), and Mercedes-Benz combined.
Value investors should hold cash flow positive companies like GM or Mercedes while trading Tesla stock as it moves either direction. Holding and hoping that Tesla stock revisits 52-week highs will not pay off. The company signed a battery supply deal with a Chinese company, which started the rally. But it also confirmed store closures in the region as a result of the coronavirus spread.
Takeaway
Tesla has weak revenue growth (2% last quarter Y/Y) and too much debt. Trade the rallies by selling into it.
