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Why Shorting Tesla Is Not a Smart Plan for Now

Stocks in this article: AMZN TSLA FB

Investors finally saw Tesla show its ability to make money -- and shareholders revalued the company. Similar price action happened with Facebook (FB) when it reported better-than-expected earnings with acceleration in the trending mobile market. The surprise quarter reversed Facebook's weak performance.

After May 2013, Tesla’s stock continued its monster rally, despite all kinds of questions and doubts related to its much-inflated stock price.

Musk addressed those concerns by focusing on perfecting the business, which resulted in increased car sales and more ambitious international expansion plans. Then the Model S received the highest rating for safety from the National Highway Traffic Safety Administration and "Best Overall Driver Experience" from Consumer Reports.

Read More: 10 Stocks Carl Icahn Loves in 2014

Tesla’s rally is fueled mostly by what I call the price-to-dream ratio.

Every traditional, fundamental valuation method says the stock is overvalued. People are willing to pay up for the future. Always keep this in mind -- an overheated stock still isn't necessarily an ideal short target.

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