Sodastream International Ltd (SODA), Tesla Motors Inc (TSLA), SolarCity Corp (SCTY): Are Any Of These High-Rollers Still Worth Buying?

Contrary to the positive market sentiment, analysts at two firms downgraded SolarCity Corp (NASDAQ:SCTY). Credit Suisse and Roth cited rising costs, a high share price return relative to the IPO price, and revenue guidance below analyst consensus as reasons for the downgrade.

Valuation

Source: Yahoo Finance

Tesla Motors Inc (NASDAQ:TSLA) and SolarCity are early-phase companies. Sales have not yet reached a high enough value to offset the double digit price/sales values. Tesla has a price to sales of 10.7, while SolarCity’s price to sales is 21.

Conclusion

The three companies all show what happens when investors have excessive excitement for their future. Tesla, SolarCity Corp (NASDAQ:SCTY), and SodaStream could all keep going up, ignoring all valuation metrics that imply that they are expensive. It looks as though Tesla could move either way in the short-term, as short-covering continues, but the continued rally after a secondary share offering suggests otherwise. In fact, in an S-3 filing, Tesla announced a $450 million convert

bond offering and a 2.7 million share common stock offering. What caught bears off-guard was that Elon Musk, Tesla Motors Inc (NASDAQ:TSLA)’s Chief Executive Officer and cofounder, said he would buy $100 million worth of Tesla stock.

Investors might take profits in SolarCity Corp (NASDAQ:SCTY) in the near term, but the glut in the solar industry is slowly being resolved. Shares recovered nearly all of the recent declines and traded at around $35. Since getting credit is getting easier still, its partnership with Goldman Sachs to offer more than $500 million in lease financing virtually assures strong sales for SolarCity.

Finally, SodaStream represents the most conservative investment of the three companies reviewed. It is assuring its growth by expanding sales channels in a systematic and diversified way. Companies like The Coca-Cola Company (NYSE:KO) and Pepsi have no response in competing against Sodastream International Ltd (NASDAQ:SODA), giving the company a healthy moat.

The article What To Buy as These 3 Companies Surge originally appeared on Fool.com and is written by Chris Lau.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.