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Why I Love Tesla, but Dislike TSLA

I am, in general, optimistic about alternative energy in all of its many forms. While it may be a long way off, eventually human kind will have to find alternatives to fossil fuels; we all know that. The sooner we address that coming need, the easier the transition will be.

That doesn’t, however, mean that I’m a buyer of any and every stock related to alternative energy. For companies, potential is a wonderful thing but valuations can quickly become unrealistic when people are buying an idea rather than equity in a profitable company.  Leaving fuel cell stocks aside for now, the best recent example of this is Tesla Motors (TSLA). Back at the end of August last year, as TSLA was approaching $175 for the first time, I wrote an article that suggested that some kind of pullback in the price was inevitable.

The faithful reacted as if I had insulted their dear departed Grandmother. Everybody rushed to point out the quality of the vehicle, something which I have never doubted. I was declared unfit to give an opinion and insulted personally. It even made me wonder if there was some orchestrated campaign to answer negative articles via comments sections. Nobody addressed the fundamental issue, however; that a forward P/E over 100 when analysts have been scrambling to increase their estimates of earnings over the next couple of years is, to say the least, a little excessive.

In some ways I was right at the time, as the upward momentum did pause slightly…




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