'Fast Money' Recap: Valuation Matters for Tesla

NEW YORK (TheStreet) -- While the Nasdaq slumped 0.32%, the S&P 500 climbed 0.56% on Wednesday. 

On CNBC's "Fast Money" TV show, Guy Adami, managing director of stockmonster.com, said "valuation suddenly seems to matter" for shares of Tesla Motors (TSLA). Without its upside momentum, investors have to wait for a large-volume day where the stock reverses to the upside before getting long. 

Steve Grasso, director of institutional sales at Stuart Frankel, pointed out how well shares of Tesla have held up compared to many other "momentum" stocks over the past month. 

Brian Kelly, founder of Brian Kelly Capital, said investors are no longer willing to "stand for this type of uncertainty." Specifically regarding Tesla, he was referring to costs, sales volume and the Gigafactory as shareholder uncertainties. 

Karen Finerman, president of Metropolitan Capital Advisors, warned that shares of Tesla have not gone down nearly as much as they could, and a "collapse" in the stock price is still in the realm of possibilities. 

Ben Kallo, an analyst at R.W. Baird, has a buy rating on shares of Tesla with a $275 price target. He said the company reported a great quarter, guided for strong deliveries in the next quarter and is "firing on all cylinders." Although R&D spending is expected to increase and possibly took investors by surprise, Kallo said it is "necessary" for the company and its international expansion plans. He suggested buying the stock near $175. 

Turning to SolarCity (SCTY), the company beat on top-line expectations while once again surprising analysts by raising guidance. Kallo has a buy rating on shares of SolarCity with a $75 price target. He added the stock has more room to the upside and analysts will need to hike their price targets. 

Grasso said the $175 level in Tesla Motors coincides with the 200-day simple moving average. However, he admitted that that level may fail to hold as support. 

Kelly pointed out how poorly SCTY has traded compared to TSLA over the past several months, adding that the latter could have further downside ahead. 

Adami said the S&P 500 has been rather "impervious" to the selloff in momentum stocks but admitted the pressure is currently to the downside for the broader market. He argued that good, but not great earnings results and slower than expected growth could be a negative for stocks. 

Kelly said investors can "probably buy" Keurig Green Mountain (GMCR) at current levels. 

Grasso called shares of Caesars Entertainment (CZR) a "no touch" after missing on top- and bottom-line estimates. 

Adami said investors who believe interest rates will move higher can look at shares of Prudential Financial (PRU) on the long side and "buy it right here." 

Finerman said it's "nice to be in the content business these days," regarding the "strong" earnings report from Twenty-First Century Fox (FOXA). 

David Dewalt, chairman and CEO of FireEye (FEYE), said the company grew strongly on a year-over-year basis. The company grew revenue 160%, which is now comprised of four business segments: products, product subscriptions, services, and support. 

He added the company recently raised its guidance and had a strong overall quarter. In regards to the 91 million-share lockup expiration on May 21, he said 17 million of the shares would not be sold from management. Although he has recently sold some of his holdings, he still holds 90% of his initial stake. 

Kelly said it didn't feel right that Dewalt sold nearly 500,000 shares shortly before a previously underwhelming earnings result.

Finerman disagreed, saying the stock was near $80 when Dewalt sold after pricing at $20 for its IPO. Because of the large jump in the share price, it made financial sense for the CEO to sell some stock. 

Adami was surprised by how poorly Internet security stocks -- FEYE, Palo Alto Networks (PANW) and Symantec (SYMC) -- have performed lately, given their growth potential. 

Grasso agreed, saying that "on paper" owning these stocks makes sense due to how big of an issue cyber security has become. 

Yahoo! (YHOO) fell over 6%. Adami could not make sense of the of stock's price at $34 given that the valuation for its Alibaba stake should price the stock above $40. 

Finerman questioned if the valuation for Alibaba is too high, and also suggested that shares of Yahoo! simply got caught up in Wednesday's technology selloff. 

Grasso agreed with Finerman, saying the strong selling in AOL (AOL) likely weighed on shares of Yahoo!.  Kelly suggested that perhaps Yahoo!'s core business is simply not worth as much as the Street had initially assumed. Because of this, shares have been unable to move above $40. 

Dan Nathan, co-founder and editor of riskreversal.com, made an appearance to update investors about a few of his positions. He is covering his short position in Twitter (TWTR), saying that at some point the stock will become oversold and likely bounce higher. He is also short-selling Netflix (NFLX) via put options, saying it looks likely to test the $300 level. 

Kelly said investors of Whole Foods Market (WFM) have become accustomed to beat-and-raise earnings results, not miss-and-lower situations. The stock dropped nearly 20% on Wednesday. 

Grasso said the brand for Whole Foods Market is not as strong as it once was due to increasing competition in the the organic food space. Finerman questioned if WFM was worthy of a premium valuation anymore, due to the increased competition in the space. 

Michael Rapino, CEO and president of Live Nation Entertainment (LYV), was a guest on the show. The company beat on top- and bottom-line expectations and recently announced a deal with Yahoo! to stream one live concert per day for the next year. 

He said the company has been able to sell more tickets to more events and subsequently drive revenue higher. Due to some new products set to be launch, the company should be able to further drive sales and cut costs, adding a boost to the bottom line. He showed excitement over the deal with Yahoo!, saying it will be beneficial to the business model and it will not cannibalize its sales. 

Finerman is a long-time shareholder and says she will remain long the stock. 

For their final trades, Grasso was a buyer of Southern Company (SO) and Adami was a buyer of SodaStream (SODA). Finerman was buying Cumulus Media (CMLS) and Kelly was buying the CurrencyShares Euro Trust ETF (FXE).


-- Written by Bret Kenwell in Petoskey, Mich.

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Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter.

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