Monday's Big Movers: GoPro Pops, Tesla Motors Gets Burned

Shares of GoPro rises 6%, while Tesla Motors' loses 3%

Jul 7, 2014 at 7:00PM
Longview

U.S. stocks retreated from the record high they set at the end of last week, with the benchmark S&P 500 declining 0.4% on Monday, while the narrower Dow Jones Industrial Average (DJINDICES:^DJI) fell 0.3%. The technology-heavy Nasdaq Composite Index (NASDAQINDEX:^IXIC) was down 0.8%. Among the biggest movers on Monday were two high-profile growth stocks: GoPro (NASDAQ:GPRO) (+5.7%), and Tesla Motors (NASDAQ:TSLA) (-2.9%).

Images

GoPro's first-person-viewpoint video cameras are a favorite among extreme sports enthusiasts and the stock itself has provided investors with a wild adrenaline ride since it began trading less than two weeks ago. Through today's close, GoPro shares have risen 83% from their $24 initial public offering price. Given that stunning run-up on high volume and the dearth of volatility in the broad market, today's start of trading in options on GoPro's stock was highly anticipated; oddly, however, it turned out to be a relatively sober affair.

The Wall Street Journal reported that, as of 3:20 p.m. ET, only 24,000 option contracts had traded on Monday, representing rights on some 2.4 million shares of GoPro (one call (put) option contract represents the right to buy (sell) 100 shares). By comparison, 122,000 options on Twitter's shares changed hands on the first options trading session last November. Nevertheless, today's options activity appeared to reflect a positive bent in investors'/ speculators' outlook for GoPro's stock, with calls more active than puts by a factor of 2-to-1. Calls are a right to buy shares before a fixed date at a pre-determined price; puts are a right to sell shares before a set date at pre-determined price.

It's far from clear that the nearly 6% pop in GoPro shares today is related to the launch of stock options. In any event, I'm going to continue to caution fundamentally oriented investors who are looking at the stock: I like the product and the way in which the company is building its brand and following; however, at more than 56 times forward earnings per share (per data from Bloomberg), investors are setting are setting a very high bar for the company's performance. One thing is certain, though: This adrenaline ride isn't over -- expect more volatility ahead.

Tesla gets burned
The incident involving a Tesla Model S early on July 4 had all the ingredients of "great television": the theft of the car from a Tesla showroom in Los Angeles, followed by a high-speed chase through the city that ended with a violent crash that split the car in two and set it ablaze. Great television, perhaps, but a poor reason to make an investment decision -- which didn't stop "investors" from selling down Tesla's shares today, for a near 3% decline.

The story may have revived a fear that had been stoked by the significant media attention that two Tesla Model S car fires received last year. The reality is far from alarming, however: As Tesla remarked in March, "the odds of fire in a Model S, at roughly 1 in 8,000 vehicles, are five times lower than those of an average gasoline car and, when a fire does occur, the actual combustion potential is comparatively small." Despite these numbers, Tesla went the extra mile and added a titanium underbody shield and aluminum deflector plates to the Model S to further increase the level the protection and offered to retrofit existing vehicles free of charge (General Motors, take note).

The incident that occurred over the weekend is totally immaterial to the investment case for Tesla. That's not going to stop some investors from acting on this type of trivia; meanwhile, they were never concerned by the stock's stratospheric valuation -- at 70 times estimated 2015 earnings-per-share, it remains a genuine potential threat.

Warren Buffett's worst auto-nightmare (Hint: It's not Tesla)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to invest in this megatrend. Click here to access our exclusive report on this stock.

Alex Dumortier, CFA, has no position in any stocks mentioned. The Motley Fool recommends General Motors and Tesla Motors and owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers