Is Tesla Motors a Good Portfolio Play?

With shares of Tesla Motors (NASDAQ:TSLA) trading around $239, is TSLA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Tesla Motors designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. The company also provides services for the development of electric powertrain systems and components, and sells electric powertrain components to other automotive manufacturers. It markets and sells its vehicles through Tesla stores as well as over the Internet. Consumers and companies are looking to save at the pump, and what better way to do so than with electric vehicles?

“It was never my intention to be CEO. I tried to actually not be CEO quite hard,” stated Elon Musk, CEO of Tesla Motors. Musk is without question a great innovator. But is he a good manager and leader? Some have wondered, with his fingers in so many pies, is his intention for Tesla to be a hit and run project after which he’ll let somebody else take over the reins, or does he plan to stick around for awhile? Now that the hardest parts of development and adoption of its products seem to be in the company’s rear-view mirror, and operations are comparatively on cruise control, it makes one wonder: Is Musk on his way out? On June 3, Tesla Motors hosted its annual shareholder meeting, during which came an exciting, fact-filled, and inspiring question and answer session with Musk. First, Musk offered a bit of background coloring about the company’s accomplishments and other various bragging points, such as that Tesla’s vehicles have been driven close to 344 million miles without a serious accident.

Due to the software nerve center of the vehicles, Tesla knows exactly how many miles have been driven around the globe. Having over-the-air access to information about its vehicles is a very valuable tool for tracking safety, satisfaction, and reliability for the company so that it can make adjustments when needed. Musk reminded the crowd at the meeting that the company is production limited, as opposed to demand limited. The biggest issue has been the supply of battery cells, which is being alleviated gradually this year and into next. Tesla wants to eventually open what it calls a “Gigafactory” to solve the battery supply problem. It’s a long-term project that it has been implied that Musk will be staying around for but nothing had really been confirmed. Musk did say during the presentation that he really wants “people to love their car.” He added, “And in fact my goal is that people like the Model S more than their house. I think that is actually the case in some situations.” That’s another hint that he will stick around a while.

T = Technicals on the Stock Chart are Strong

Tesla Motors stock has struggled to make progress over the last couple of quarters. However, the stock is currently trending higher and looks set to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Tesla Motors is trading above its rising key averages which signal neutral to bullish price action in the near-term.


Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Tesla Motors options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Tesla Motors options




What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options



August Options



As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.