Thursday, April 4, 2013

Tesla: Earnings, Smernings!

For the three fiscal years since Tesla (TSLA) has been a public company, it has yet to earn an annual profit, posting negative earnings for FY2010-2012. As a result, it's a favorite among short sellers with approximately 32 million shares short compared to the float of about 65 million shares -- a whopping 49% short as percent of float. Wow.

Looking at the charts, you'd never know Tesla has been in the red for years. 



TSLA recently hit a new 52-week high and is up 31% YTD through yesterday. (The charts above are from Monday evening). The first chart shows a bullish cup with handle formation and the second chart shows a bullish inverse head-and-shoulders formation with breakout. 

Tesla is expected to earn a profit in FY2013, so as per usual price is likely discounting the future, moving on expectations as opposed to past history. 

Some larger lessons can be learned from TSLA. For one, try to avoid shorting companies you believe will go bankrupt, or at least hold off until the chart agrees with you. Many have long felt TSLA would soon go bust, just counting the days, and yet the stock has more or less been a steady riser since debuting at $17. 

I remember in 2009-2010 it was an "easy" call that Radioshack (RSH) would go out of business, with many at the time poking fun at the company saying a business could not thrive on simply selling people batteries. Yes, RSH stock is down almost 50% in the past 12 months, but from April 2009 through June 2010 the stock rose 130%. Best to wait for the technicals to confirm future downside. 

Another lesson: do not invest according to your political bias or beliefs. TSLA has been a stock to mock by those who have high doubts about renewable energy and/or are not big fans of Obama. When it comes to your wallet & investing, try to be ideologically and politically agnostic. That can often be hard to do, but you'll be richer for it, literally. 

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