Tesla Earnings Preview: 2 Trades for TSLA Stock

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Tesla Motors (TSLA) will step onto the earnings stage tomorrow afternoon, and the company won’t have a new product line of home batteries to hide behind this time around. This time, it’s all about production and supply numbers. And with investor sentiment languishing in bearish territory, the potential for an influx of sideline money on a positive report could make for solid contrarian trade ahead TSLA earnings.

tesla stock motors tsla stockRunning the numbers, Wall Street is expecting Tesla to report a year-over-year second-quarter loss of 60 cents per share. Meanwhile, revenue is seen rising 36% to $1.17 billion. That said, EarningsWhisper.com reports that expectations may be much higher, with the second-quarter whisper number for TSLA earnings coming in at a loss of 19 cents per share.

This is where the bullish sentiment for Tesla stock ends, however. Data from Thomson/First Call points to 10 “buys,” seven “holds” and three outright “sells.” Additionally, the 12-month consensus price-target of $309 represents a very modest premium of about 18% to yesterday’s close.

Elsewhere, short sellers have loaded up heading into Tesla’s quarterly report. As of the most recent reporting period, some 23.4 million TSLA shares were sold short, accounting for a hefty 24% of the stock’s total float.

Over in the options pits, it doesn’t look like short sellers are hedging their bets to any excessive degree. Currently, the August put/call open interest ratio comes in at 0.74, rising only slightly to 0.76 for the weekly Aug 8 series. Both readings are rather middling, and indicative of a slight bearish lean from the options crowd.

TSLA 8-4-2015
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Overall, weekly Aug 8 series implieds for TSLA stock are pricing in a potential post-earnings move of nearly 8%. This places the upper bound at $280.21, while the lower bound lies at $23.79. A post-earnings rally would put TSLA stock price just shy of all-time high territory, while a decline could have the shares testing support at their 200-day moving average in short order.

2 Trades for TSLA Stock

Call Spread: With all eyes on Tesla shipments and deliveries, it should be noted that the company already topped second-quarter delivery forecasts back in early July. If deliveries kept pace (and there’s no reason to believe they haven’t), Tesla could be set to not only top earnings estimates, but also raise guidance going forward. Add to this the potential for unwinding bearish sentiment (i.e. upgrades, price-target increases, short covering), and we have the makings of a potentially strong post-earnings rally.

As such, traders looking to bet bullish on TSLA might want to consider an Aug $265/$275 bull call spread. At the close of trading on Monday, this spread was offered at $3.50, or $350 per pair of contracts. Breakeven lies at $268.50, while a maximum profit of $6.50, or $650 per pair of contracts, is possible if TSLA stock closes at or above $275 when August options expire.

Put Sell: If selling premium is more your thing, then a weekly Aug 8 series $220 put sell may be what you are looking for. After the close on Monday, the weekly Aug 8 $220 put was bid at 69 cents, or $69 per contract.

On the upside, you keep the premium received as long as TSLA stock closes above $220 when August options expire at the end of this week. On the downside, should TSLA trade below $220 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $220 per share.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/08/tesla-motor-co-earnings-preview-2-trades-tsla-stock/.

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