NEW YORK (TheStreet) -- Tesla (TSLA) investors abruptly switched gears Tuesday. Shares of the luxury electric car manufacturer fell 1.5% by 2p.m. after roaring ahead for most of the morning on positive analyst comments and a British newspaper article.
$TSLA Feels like a big roll over here.? Chris (@GoldStan) May. 20 at 10:33 AM
Tesla's stock rallied following a bullish Morgan Stanley analyst note, published Monday and reported by Barron's Tuesday. In his note, Morgan Stanley analyst Adam Jonas reiterated his overweight rating and told longs not to worry about the bears' case for a Gigafactory failure. Tesla, Jonas said, has a history of proving naysayers wrong -- 25% gross margin case in point. Jonas argued that Panasonic wouldn't have signed on to the planned Gigafactory lithium battery facility if it didn't see potential in Elon Musk's strategy of housing battery-parts suppliers and manufacturers under the same roof.
British press added to the morning's bullish Tesla sentiment. The Telegraph reported that Tesla will launch a right-hand drive version of its Model S on June 7, helping to fuel demand in the UK. The paper suggested that the first British customer is a well-known Tesla fan. (Perhaps Richard Branson? According to Tesla's blog, the Virgin CEO couldn't get enough of the car a couple years ago).
But comments by known Fed-hawk Charles Plosser indicating a rate hike could come sooner than many expect quickly reversed Tesla's positive momentum. Two hours after Plosser spoke, Tesla was in the red and comments about P/E ratios flooded the Tesla ticker stream on StockTwits.com. The fear is that higher interest rates will damage economic growth and cause investors to shift money to safer assets rather than chase yield with relatively risky growth stocks.
$TSLA 199 was ideal for short entry .. still not too late tho. take your profits and go short now.? rags2richez (@rags2richez) May. 20 at 01:27 PM
Even after declining 6% in the past three months, Tesla shares still trade at 61X expected 2015 earnings. However, factoring in expected growth in the next five years, the company doesn't look as pricey. Tesla has a five-year PEG ratio of 3.94, according to stats on Yahoo! Finance.
Perhaps that's one reason that sentiment on Tesla overall is still majority bullish. About 73% of comments call for the stock to increase in value, according to StockTwits' analytics. Growth ratios are particularly important for disruptive technology companies, such as alternative energy vehicle manufacturers, because sales increase so much year-to-year that looking at historical profits and expectations for the current year don't tell the whole story.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.