The suddenly hot IPO market is about to get a little bit hotter with this week's Tesla Motors.
It's a great story stock, but my "Call-to-Action" is a little less enthusiastic: rent, but don't buy Tesla for the long-term.
If you can get in on the current expected price ($14 to $16), I'd say you have about four bucks to the upside. Then, I think you should sell.
But first, here are five reasons to buy:
1. It's a Green Tech story. These energy-conscious companies have fared well this year and continue to attract portfolio managers' interest.
2. There's a deal with Toyota to buy Tesla's Fremont, Calif. plant with the intention of reinvesting $50 million into Tesla for a 2.5 percent stake. This is exactly the kind of validation of valuation that portfolio managers favor.
3. Despite strong early buzz, the $14-$16 price range seems to be sticking with underwriters. This leaves room for a possible jump after the deal prices.
4. GM and Chrysler are still out of the public equity markets. Toyota, the former "closet-index" favorite, remains under a cloud of dust. There is room for the "closet indexers" to add an auto stock to their portfolios.
5. Tesla has additional access to capital with a US taxpayer loan of $465 million through the Department of Energy. That should give it plenty of cash.
Take Tesla for a spin, but don't get greedy and hold it past a nice profit should it rise.
The company is still printing losses, and the current market potential of Green Tech stocks still makes Tesla a niche player. Maintain a strong sell discipline here.
This Green Tech automobile IPO makes sense for a quick ride.
Related Links:
- Tesla Motors Raises Target for IPO
- Toyota Aims to Open U.S. Plant in 2011
- Tesla Aims for $185 Million in First Offering
- Phil Lebeau's 'Behind the Wheel' Blog
"The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.
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