With the media focusing heavily on Tesla Motors Inc’s (NASDAQ:TSLA) $2.6 billion acquisition of SolarCity Corp (NASDAQ:SCTY), Tesla’s looming Q2 earnings report has largely been overshadowed. Make no mistake, this report will have a major impact on Tesla stock price, which is currently bouncing around the $230 region. Key aspects of the report will be adjusted earnings, any guidance impact from the SolarCity deal, and any news or updates on next year’s all-important Model 3 launch.
Taking a look at the numbers, Wall Street is expecting Tesla to report a Q2 loss of 55 cents per share, with revenue rising 35% to $1.62 billion. That said, EarningsWhisper.com reports that expectations may be a bit lower than the consensus, with the Q2 whisper number resting at a loss of 56 cents per share.
There isn’t much in the way of bullish sentiment when it comes to Tesla stock. Analysts have all but abandoned the shares, with Zacks data indicating that only 4 of the 16 brokerage firms following TSLA rate the shares a “buy” or better. Additionally, the 12-month consensus price-target of $252.58 represents a meager premium of about 9.8% to yesterday’s close.
Meanwhile, short sellers are heavily loaded ahead of tomorrow’s earnings report. As of the most recent reporting period, some 29.3 million shares of Tesla stock were sold short, accounting for more than 27% of the stock’s total float, or shares available for public trading.
Among short-term speculators, options traders are standoffish when it comes to Tesla stock. Currently, the August put/call open interest ratio comes in at 1.09, with puts (or bets that TSLA will decline this month) outnumbering calls. This ratio rises to 0.85 for the weekly 5 series, however, giving some indication that short sellers may be taking precautions ahead of the event by hedging their positions with purchased calls.
Click to Enlarge Expectations for a post-earnings move is typical for Tesla stock, with weekly Aug 5 series implieds pricing in a potential move of about 7%. This places the upper bound at $246, while the lower bound lies at $214.
Unless Tesla drops major news tomorrow, TSLA should remain between resistance at $250 and support near $210 through the end of the week, given current volatility readings. However, follow-through buying or selling could push Tesla stock beyond these levels by monthly August expiration on the 19th.
2 Trades for Tesla Stock
Call Spread: TSLA has been plagued by negativity for a while now, and CEO Elon Musk’s perceived impropriety in the SCTY deal is weighing heavily on sentiment. Because of this, it may be easier for Tesla stock to garner a post-earnings bump on any positive news tomorrow night.
Traders looking to take advantage of such a bump might want to consider an Aug $235/$240 bull call spread. At last check, this spread was offered at $1.85, or $185 per pair of contracts. Breakeven lies at $236.85, while a maximum profit of $3.15, or $315 per pair of contracts, is possible if Tesla stock closes at or above $240 when August options expire.
Put Sell: If selling premium is more your thing, then a weekly Aug 5 series $195 put sell may be what you are looking for. At last check, the weekly August $195 put was bid at 25 cents, or $25 per contract.
On the upside, you keep the premium received as long as Tesla stock closes above $195 when August options expire at the end of this week. On the downside, should TSLA trade below $195 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $195 per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
