Friday Charts: Tesla’s Absurd Valuation and Amazon’s Endless Warpath

It’s Friday in the Wall Street DailyNation. And that means we’re ditching our regular routine of commentary-based articles. Instead, we’re using charts to present some important investment and economic insights.

This week, we’re tackling the pesky debate about Tesla’s valuation and the Great Retail Apocalypse of 2017.

And of course, we’re sharing ways to profit from each. Don’t miss the opportunities!

The Absurdity of Tesla

In early March, we covered Bitcoin’s historic breakout. For the first time ever, the cryptocurrency traded higher than one ounce of gold.

Big whoop? Not really. But I digress…

This week, we’re covering the historic breakout of electric carmaker Tesla (TSLA).

For the first time ever, the company’s market cap (briefly) surpassed General Motors (GM), to become the most valuable car company in America, at $51 billion.

Way back in December 2013, a younger, scruffier Lou deemed Tesla’s valuation at $18 billion “absurd” on CNBC’s Closing Bell. My on-air adversary, The Motley Fool’s Matthew Argersinger, reminded me of my bold denouncement this week on Twitter as the company rallied north of his $50-billion market-cap prediction.

Touché. But I still think Tesla’s valuation is “absurd.” And the data still back me up.

The Big Three Automakers

Tesla still hasn’t generated a profit — 10 years into its existence. The company produces a fraction of the number of cars that GM and Ford produce, so its revenue lags way behind. Not to mention the company’s heavily indebted, too.

So based on every conceivable traditional metric, the company fails to stack up.

What’s driving Tesla’s current valuation, then?

Hope.

Elon Musk even admits it.

Elon Musk tweet

Bidding up shares on the future potential works fine during rip-roaring bull markets. Not so much when the stock market takes a turn to the south. And it’s only a matter of time before the latter happens.

I’m smart enough to avoid shorting such an overly hyped stock. In this case, the best way to bet on a less absurd valuation for Tesla is via January 2019 put options.

I’ll check back in then to see if I’m still wrong, Matthew.

Signs the Retail Apocalypse Keeps Getting Worse

I first covered the Great Retail Apocalypse of 2017 in my March 24 column.

Since then, my colleagues have shared multiple ways (see here and here) to profit from the untimely demise of the sector — triggered by Amazon’s domination of every market it enters.

So what are you waiting for?

The latest data point to an ever-quickening pace of destruction.

Year-to-date store closings already outpaced the number experienced during the Great Recession, according to a recent analysis by Credit Suisse Group AG analyst Christian Buss.

A whopping 2,880 closings have been announced so far this year. That compares with 1,153 in the same period last year. If we extrapolate this pace out for the entire year, there could be almost 2,500 more closings than we experienced in 2008.

Annual U.S. retail store closings

The latest retail employment report paints a similarly dismal picture for the industry.

The latest data dump from the Bureau of Labor Statistics revealed a decline of 29,700 retail jobs in March. That comes on the heels of a loss of 30,900 jobs in February.

Month-over-month change in retail employment

The two-month rapid decline represents the largest since — you guessed it — the Great Recession. If you’re looking for short-selling opportunities, there’s no better industry to focus on.

Ahead of the tape,

Louis Basenese
Chief Investment Strategist, Wall Street Daily

You May Also Be Interested In:

Key to the End of the Bull Market

It’s Friday in the Wall Street DailyNation. And that means we’re ditching our regular routine of commentary-based articles. Instead, we’re using charts to present some important investment and economic insights. This week, we’re tackling the pesky debate about Tesla’s valuation and the Great Retail Apocalypse of 2017. And of course, we’re sharing ways to profit...