I am, in general, optimistic about alternative energy in all of its many forms. While it may be a long way off, eventually humankind will have to find alternatives to fossil fuels; we all know that. The sooner we address that coming need, the easier the transition will be.

That doesn't, however, mean that I'm a buyer of any and every stock related to alternative energy. For companies, potential is a wonderful thing, but valuations can quickly become unrealistic when people are buying an idea rather than equity in a profitable company. Leaving fuel-cell stocks aside for now, the best recent example of this is Tesla Motors ( TSLA ). Back at the end of August last year, as TSLA was approaching $175 for the first time, I wrote an article that suggested that some kind of pullback in the price was inevitable.

The faithful reacted as if I had insulted their dear departed grandmother. Everybody rushed to point out the quality of the vehicle, something which I have never doubted. I was declared unfit to give an opinion and insulted personally. It even made me wonder if there was some orchestrated campaign to answer negative articles via comments sections. Nobody addressed the fundamental issue, however -- that a forward P/E over 100 when analysts have been scrambling to increase their estimates of earnings over the next couple of years is, to say the least, a little excessive.

In some ways I was right at the time, as the upward momentum did pause slightly after, and by November the stock was trading below $120, but I seriously underestimated the power of a band of buyers committed to an idea. That correction simply paved the way for another strong run up past $250. At these levels, it's time, once again to advise caution.

I feel that I must make one thing clear. I'm not anti-Tesla as a company, nor am I opposed to electric vehicles, I just don't like TSLA at these levels. I know that some will think that somebody writing for Oilprice.com has some huge stake in perpetuating the fossil fuel industry, and is probably secretly paid by the big car manufacturers. I wish that both were true, I would love to live long enough to care about fossil fuel exhaustion and could always use another source of income, but they aren't.

Nor am I one of the conspiracy theorists who believe that there is something nefarious about Tesla's accounting. Booking lease revenues before they are realized is akin to a retailer booking gift card sales, but that rule never made sense to me when I was a retailer anyway. The fact is that even using GAAP, the company made money last quarter. It has turned the corner into profitability. Its commitment to build a battery factory of its own is a smart one, too. It will result in significant long-term cost savings and go some way towards easing supply problems, but battery supply will still put a limit on the rate of expansion in the near future.

Add to that the problem that Tesla is having trouble getting its direct-to-the-customer sales model approved in some states, such as New Jersey , and the problem becomes obvious. A slight "potential premium" in terms of P/E for the stock is undoubtedly justified, but given supply and distribution restrictions, around 130 times predicted earnings compared to just over eight times for Ford ( F ) and General Motors ( GM ) with no such problems and established distribution seems, well, crazy.

If you are not as fanatical as the obviously unbiased "Tesla4everyone" (I kid you not) who replied to my August article, you may consider shorting TSLA on valuation alone, but if so, a word of warning. My trading room background impressed on me the value of stop losses, and for a countertrend trade such as this, setting and sticking to a stop would be essential. It isn't reason that is driving TSLA up at this point, and even if it doesn't meet growth forecasts in the next couple of quarters, the stock could continue to defy logic.

At some point, though, one of two things has to happen. Either Tesla must continue to grow exponentially and make even those increased estimates of revenue and profit look silly, or the price must begin to more accurately reflect the reality. The latter seems more likely to me. A world where electric vehicles are the norm is a distinct possibility and is probably desirable, but it isn't here yet. TSLA, however, is priced as if it is, and that's why, as much as I admire what Tesla is doing, I'm not a fan of its stock.

This article was written by Martin Tillierof Oilprice.com .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.