Three companies that rose sharply in May are Sodastream International Ltd (NASDAQ:SODA), Tesla Motors Inc (NASDAQ:TSLA), and SolarCity Corp (NASDAQ:SCTY). Their recent rise is illustrated in the chart below:
Home-made soft drinks
In the beverage business, Sodastream International Ltd (NASDAQ:SODA) traded sharply higher, after trending at around $50 for most of 2015. Sodastream International Ltd (NASDAQ:SODA) closed at around $64.08 after reporting quarterly earnings of $0.68 per share on revenue of $117.6 million, which exceeded analyst expectations. The company then proceeded to raise its revenue guidance. On its conference call, the company highlighted its consumables sales growth of 109% and sales increasing 93%, both in the U.S. region.
Sodastream International Ltd (NASDAQ:SODA) has a product that lets consumers conveniently carbonate and flavor their water. The product is on an growth phase that is accelerating. SodaStream expanded to Wal-Mart Stores, Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT) during the first quarter.
In 2013, the company forecasts EBITDA growth of 36%. To ensure products remain ahead of the competition, Sodastream International Ltd (NASDAQ:SODA) is innovating in a number of ways. The product is being made easier to use, while its automatic Revolution soda maker is expanding distribution in all of its markets.
New age automotive sector also rises
In the electric car business, Tesla Motors Inc (NASDAQ:TSLA) is up 146% in 2013 and up 50% in the last 5 days. Tesla is scheduled to make an announcement about its Supercharger Network on the week of May 20, 2013. Tesla Motors Inc (NASDAQ:TSLA) reported quarterly earnings of $0.12 on revenue of $562 million. The results beat estimates easily on May 8, and it sparked a short-squeeze for shares. There are 74.53 million shares short, which represents a short float of 36.90%.
During its conference call, the company said more than 5,000 units of the Model S were produced during the quarter. The high production boosted efficiency, improved gross margins to 17%, and is helping Tesla Motors Inc (NASDAQ:TSLA) possibly exceed its 20,000 vehicle delivery goal.
Solar energy in the sunlight once again
In the solar energy space, SolarCity Corp (NASDAQ:SCTY) is up around 29% in the last 3 months. The company was analyzed favorably on The Motley Fool on January 16, 2013 when shares were around $15.50. SolarCity Corp (NASDAQ:SCTY) is now around $31.44, helped by a quarterly report that beat on revenue estimates. The company lost $0.41 per share on sales of $30 million. 46 megawatts were deployed, up 12% from last year. In 2013, the company will deploy 250 megawatts.
On its conference call, SolarCity noted the increase in operating expenses to $34.5 million, due primarily from the cost of acquiring customers. On the balance sheet, the customer acquisition is counted as an operating lease asset, whose lease duration is typically 20 years.
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
| NAME | MKT CAP | AVG VOL | PRICE/SALES | EBITDA |
|---|---|---|---|---|
| Tesla Motors, Inc. | 9.59B | 2,351,440 | 10.7 | -268.59M |
| SolarCity Corporation | 2.37B | 612,884 | 20.98 | -47.85M |
| SodaStream International Ltd | 1.33B | 967,569 | 2.54 | 58.08M |
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.
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