Why we should sell Tesla Motors Inc (NASDAQ:TSLA) for $ 221 ?

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     Tesla's CFO has resigned, as announced by the company at its annual shareholder meeting.

·       Last time an executive resigned (Veronica Wu, who was heading up China), poor performance headlines followed.

·       This resignation adds to continued valuation concerns about why Tesla is not a good investment here.

·       Pragmatic thinking would tell us otherwise; we just think people in key roles don't leave companies that are on the cusp of taking things to the next level. And we don't think Tesla's CFO is any different of a situation.

·       There's no real scenario we can think of where Tesla is going to take things to the next level supportive of its valuation in the near term, where the CFO is also going to want to call it quits; not for personal reasons or urgency, but because it's time to "retire

That was in late 2014. The headlines that followed in early 2015 looked like this:

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We don't think this is a coincidence. Yet, analysis like this article explores the CFO's resignation as a non-event, suggesting the future will perpetually be bright for Tesla.

This is a crucial point in Tesla's business. The stock continues to be overvalued from a valuation standpoint, in our opinion.

Ahuja is taking an early retirement - what does it say about where the business is going to go in the short term? Can it operate the way it needs to in order to fill out the valuation the market has placed on it?

Ahuja is leaving the company with a levered balance sheet and a stock that's trading at 9x its sales and an astounding 39x its book value.

This event comes months after Tesla CEO Musk nonchalantly kept investors waiting on the company's conference call before announcing poor performance that was less than pleasing to the market.

Rough Waters Ahead?

Tell us if these situations could at least be reasonable.

Could it be that priorities for the key executives at Tesla have shifted as the company branches out into batteries and strays from its initial vision of being a car company. Could we be at the point where we're going to see an executive suite refresh cycle beginning? Either way, we don't think Tesla is a buy.

1.     Again, the valuation is way out of line, with the company priced at about 71x what it's expected to earn next year. Most auto companies trade between 10-20x earnings consistently.

2.     The valuation basically makes the statement that continued growth is going to be a perpetuity. That, of course, is governed not only by the company (who admittedly has done well thus far rolling out), but also by the auto sector and the economy as a whole. All of these things need to hold up over the next 5-10 years, nearly flawlessly, for Tesla to be priced appropriately here.

3.     At a critical point in the business where Tesla is going to continue to ramp capex associated with rolling out its new models and battery offering, the bottom line is going to continue to elude investors, we believe.

We're approaching this resignation with a bit more skepticism than others. We are bearish on Tesla coming into this, and we think this resignation shows us yet another reason why Tesla has more potential downside here than upside reward.

Vtrade Capital  is expecting Tesla Motors Inc (NASDAQ:TSLA) to approach $ 221 by end for third quarter.