Tesla Motors Inc (NASDAQ:TSLA) is a great opportunity for short sellers according to William Koldus, founder of Koldus Contrarian Investors, MarketWatch reports. He recommends shorting it and other tech stocks while taking a long position on commodities.
Tesla stocks spectacularly overbought
Tesla Motors Inc (NASDAQ:TSLA), which produces electric cars, has had a rough couple of years as it has tried to convince investors that its business model is viable, but when the company post its first ever profits last quarter stock prices jumped and have yet to return to earth. Up nearly 300 percent since the start of the year and 140 percent above the 200-day moving average, Koldus says that Tesla is currently “spectacularly overbought”.
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Those first quarter profits were largely the result of Model S sales, which was a commercial success but may not have enough of market to continue to drive growth. Tesla Motors Inc (NASDAQ:TSLA) also benefited from clear-air credits that will also diminish in future periods.
With an earnings report due later today, it’s tempting to try to get in before some potentially disappointing news, but Koldus recommends against it. Right now 24 percent of Tesla Motors Inc (NASDAQ:TSLA) shares are already being shorted, and right now markets appear to be driven more by sentiment than fundamentals anyway. Most investors are already expecting Tesla to post a loss, and other factors will likely determine the immediate reaction to the earnings report. But once things settle down, Koldus recommends a short position that gives Tesla stocks time for a serious correction.
Recommendation of tech stocks
Koldus also recommends a number of tech stocks including Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and LinkedIn Corp (NYSE:LNKD) as attractive shorts and says that they can be paired with commodities that have been dropping recently, partially in response to slowing emerging markets and partially because investors are pulling money out of their defensive commodities positions. If the recovery doesn’t go exactly as planned, tapering comes faster and harder than people expect, or if sentiment simply changes and the markets experience a hard correction then going long on commodities could potentially pay off by the end of the year.
Tesla Motors Inc (NASDAQ:TSLA) stocks dipped today to $135. The consensus end of year price is around $111, even though a majority of analysts still consider Tesla to be a buy.