Shares of Tesla Motors Inc (NASDAQ:TSLA) stock are rocketing higher on fundamental news the company has plans to develop 400 charging stations in China.
Shares gapped higher, trading near $271 in late morning trading, as Tesla continues to surprise on the upside with fundamental news. On a momentum basis, the stock, which looked like it might be due for a summer breather, is extending what can be considered a breathtaking climb.
As previously noted in ValueWalk, when Tesla Motors Inc (NASDAQ:TSLA) first came out its stock was greeted with scorn by many mainstream Wall Street analysts.
Near the end of June, 2010, Tesla Motors raised $226.1 million dollars in an initial public offering and rocketing 40 percent in value. After this success, the stock bounced around in a range for years, finding support in the teens and overhead resistance near $40 per share. For momentum players it was a good stock to trade as it exhibited positive volatility but adhered to common market principles in its stock price.
For a value investor the stock was a quandary. Its “earnings” were largely based on estimates and, like many tech IPOs, traditional valuation metrics didn’t apply much to the stock whatsoever. Fundamental economists didn’t believe the market for an electric car justified the stock price.
However, many professional investors saw value and expressed an opinion in the media. Drew Cupps of Chicago-based Cupps Capital Management bought the company on the IPO and stuck with it, noted a Forbes article.
Cole Wilco’s interests in Tesla
Then came managed futures fund manager Cole Wilcox of Longboard Asset Management. Wilcox was one of several managed futures professionals who took notice when the stock broke out of a longer term resistance range near $50 and proclaimed his support. Wilcox made the argument for Tesla over the air on every major business channel and in a number of publications. His essential point was that Tesla was on its way to becoming the next great American brand and would ultimately sit atop the list of great companies with Apple Inc. (NASDAQ:AAPL) and Ford Motor Company (NYSE:F).
As the naysayers continue to doubt the legs in the stock, it climbs a wall of worry, defying expectations. The climb in stock price is difficult for a value investor to quantify. But for momentum players this traditional momentum play has just broken out of resistance.