Options for Tesla Motors (TSLA)
Click to Enlarge Wall Street is expecting a profit of 12 cents per share out of Tesla Motors (TSLA) on Wednesday evening. The company is facing key sales hurdles related to dealership laws across the company, and any news on this front could have a major impact on TSLA stock. Additionally, Wall Street will be looking for updates on the company’s coming “gigafactory,” progress and pre-order deposits on the Model X, headway with sales inroads in China, and Model S sales growth.
Optimism is muted for TSLA stock in the brokerage community. The whisper number for TSLA earnings arrives 3 cents higher than the consensus at 15 cents per share, but eight of the 14 analysts following the stock rate it a “hold” or worse. Additionally, the 12-month price target of $226 represents a premium of about 4-5% to TSLA’s current trading range.
Elsewhere, short sellers have placed significant bets against Tesla stock, with more than 25.8 million shares sold short. This collective accounts for about 28% of TSLA’s total float, and could provide fuel for a short-covering rally on any positive news.
Technically, TSLA is rebounding from an oversold condition. Tesla stock has reclaimed the 200 level, and is looking to push past its 50-day moving average once again. Short-term resistance lies near $230-$235, while a more significant hurdle rests at $265. Support lies in the $190-$200 range.
Not surprisingly, May implieds for TSLA stock suggest that the shares could move as high as $236 or as low as $195 following Tesla earnings – a potential post-earnings move of about 9.6%. Given the excessive pessimism levied against the stock despite its long-term uptrend, I’m inclined to bet against the grain ahead of TSLA earnings.
Options trade: One potential trading idea is opening a June $200/$240 bull call spread. This spread was last offered at $17.05, or $1,175 per pair of contracts. Breakeven lies at $217.05, while a maximum profit of $22.95 is possible if TSLA stock closes at or above $240 when June options expire.