Tesla, Twitter Among High-Profile Plays Crashing Today

NEW YORK (TheStreet) -- There's a lot of profit-taking in Nasdaq Monday, and it's hitting some of the year's most buzzed-about stocks hard. By mid-afternoon, Tesla Motors (TSLA), Facebook (FB) and Twitter (TWTR) were firmly in the red.

Tesla Motors dropped 7.4% to $125.40, Facebook lost 4.4% to $46.84 and Twitter shed 5.7% to $41.49, as of 2 p.m. EDT. The former two have been big gainers over the year, with Tesla gaining 270.8% and Facebook having climbed 75.9%.

Micro-blogging site Twitter has lost the gains achieved since its market debut Nov. 7. Shares are 8% lower than its IPO's opening trade of $45.10, but 59% higher than the initial offer price of $26. The stock began to sell-off earlier in the day after investment firm Wunderlich Securities initiated a "sell" rating and price target of $34.

TheStreet Ratings team rates Facebook Inc as a Hold with a ratings score of C-. The team has this to say about their recommendation:

"We rate Facebook Inc (FB) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • FB's very impressive revenue growth greatly exceeded the industry average of 9.2%. Since the same quarter one year prior, revenues leaped by 59.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • FB's debt-to-equity ratio is very low at 0.04 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with this, the company maintains a quick ratio of 10.37, which clearly demonstrates the ability to cover short-term cash needs.
  • Powered by its strong earnings growth of 950% and other important driving factors, this stock has surged by 119.09% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • When compared to other companies in the Internet Software & Services industry and the overall market, Facebook Inc's return on equity is below that of both the industry average and the S&P 500.

TheStreet Ratings team rates Tesla Motors Inc as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate Tesla Motors Inc (TSLA) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for Tesla Motors Inc is currently lower than what is desirable, coming in at 30.44%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, TSLA's net profit margin of -8.92% significantly underperformed when compared to the industry average.
  • Compared to other companies in the Automobiles industry and the overall market, Tesla Motors Inc's return on equity significantly trails that of both the industry average and the S&P 500.
  • Tesla Motors Inc reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Tesla Motors Inc reported poor results of -$3.70 a share vs. -$2.52 a share in the prior year. This year, the market expects an improvement in earnings (57 cents a share vs. -$3.70 a share).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Automobiles industry. The net income increased by 65.3% when compared to the same quarter one year prior, rising from -$110.81 million to -$38.5 million.
  • This stock has increased by 338.49% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in TSLA do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.

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