Can Tesla Continue This Bull Run?

With shares of Tesla (NASDAQ:TSLA) trading around $50, 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 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. The company operates a network of 32 stores and galleries in North America, Europe, and Asia. As consumers worldwide look for ways to save at the pump, Tesla is poised to revolutionize the automobile industry with its sleek and efficient designs.

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T = Technicals on the Stock Chart are Strong

Tesla stock has been hot since its initial public offering in 2010. The stock has seen higher highs and higher lows and is now trading near all-time high prices. 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 is trading above its rising key averages which signal neutral to bullish price action in the near-term.

TSLA

(Source: Thinkorswim)

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

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Tesla Options

68.63%

96%

91%

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

May Options

Flat

Average

June Options

Flat

Average

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…

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Tesla’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Tesla look like and more importantly, how did the markets like these numbers?

2012 Q4

2012 Q3

2012 Q2

2012 Q1

Earnings Growth (Y-O-Y)

1.27%

-66.67%

-66.67%

-68.63%

Revenue Growth (Y-O-Y)

677.88%

-13.13%

-54.19%

-38.47%

Earnings Reaction

-8.77%

8.92%

-2.83%

9.64%

Tesla has seen mixed earnings and revenue figures over the last four quarters. From these figures, the markets have had mixed feelings about Tesla’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Tesla stock done relative to its peers, Ford (NYSE:F), Toyota (NYSE:TM), General Motors (NYSE:GM), and sector?

Tesla

Ford

Toyota

General Motors

Sector

Year-to-Date Return

46.97%

0.81%

20.41%

1.56%

3.50%

Tesla has been a relative performance leader, year-to-date.

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Conclusion

Tesla manufactures and promotes vehicles that may revolutionize the auto and related industries in the future. The stock has been generating a lot of buzz lately and is actually trading in all-time high territory. Earnings and revenue figures are still being worked-out which has sent mixed vibes to investors. Relative to its peers and sector, Tesla has led the competition in year-to-date performance by a wide margin. Look for Tesla to continue to OUTPERFORM.

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