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Tesla Keeps Cleantech Revving

14 February 2014 in Trading Ideas

After the stock put up a market-dominating surge of 346% in 2013, one might understand those investing in Tesla feeling both lucky and increasingly wary that all of that increase would hold up in 2014.

But with a jump of more than 30% in the market’s first six weeks of 2014, traders may now be even more emboldened to enjoy the ride.

Earlier this week, the carmaker’s shares crossed $200 for another all-time high on renewed enthusiasm about the company’s overseas prospects – specifically, in China.1


The Chinese government recently decided to extend subsidies on electric cars in the country in efforts combat what has become some of the world’s worst smog and air pollution. China said electric-vehicle incentives will be higher in 2014 than previously announced. Subsidies are only going to be cut 5% this year, instead of an initial 10% target, while getting a 10% trim in 2015, compared with an original target of 20%.

Now, here’s where we all get a lesson in how powerful stock momentum can be – TESLA DOESN’T EVEN QUALIFY FOR THESE SUBSIDIES!

That’s right, as Wedbush Securities analyst Craig Irwin conceded, the new Chinese subsidy tweaks “don’t fundamentally impact” Tesla. On the other hand, Irwin noted, the news is “headline positive” and works to create favorable conditions ahead of the company beginning sales of its flagship Model S car in China next month.

The Model S, of course, has been front and center for the recent surge in Tesla – and its stock. Shares began moving higher last month on the company’s announcement that fourth-quarter shipments of the Model S and revenue were 20% higher than expected.

And it didn’t hurt much that Tesla CEO Elon Musk said in an interview in January that Chinese sales could match US levels as early as next year.

Tesla’s run-up of the past month has also been a key driver of performance of the Cleantech Everywhere motif, where Tesla’s stock has a 17.8% weighting. The motif has gained 5.9% in the past month. In that same time frame, the S&P 500 is essentially flat, up 0.2%.

In the past 12 months, the motif has risen 88.8%. The S&P has increased 22.3%.

But the motif has also had a nice recent bump from its solar power segment, which may have gotten an emotional boost from President Obama mentioning the sector’s key role in America’s energy strategy during his State of the Union address.

How long Tesla can continue to lead the motif higher will be in sharper focus on Feb. 19, when the carmaker reports fourth-quarter earnings. Any hint of ordinariness may put an immediate roadblock in front of any further rally in Tesla.

1Alan Ohnsman, “Tesla Reaches High as Investors Anticipate Foreign Sales,” Bloomberg.com, Feb. 11, 2014, http://www.bloomberg.com/news/2014-02-10/tesla-reaches-record-as-investors-anticipate-foreign-sale.html?cmpid=yhoo.