Can Tesla Motors Get Past a Recent Setback and Outperform?

With shares of Tesla Motors (NASDAQ:TSLA) trading around $169, 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?

Tesla shares fell early in the week, following the announcement of a National Highway Traffic Safety Administration probe, but they rebounded when the agency said it would not open an investigation on Thursday. The government agency told The Detroit News: “After reviewing all available data, the National Highway Traffic Safety Administration has not found evidence at this time that would indicate the recent battery fire involving a Tesla Model S was the result of a vehicle safety defect or noncompliance with federal safety standards. The agency continually reviews incoming and prior consumer vehicle complaints, as well as other data to identify potential vehicle defect trends and takes appropriate action as necessary.”

T = Technicals on the Stock Chart Are Strong

Tesla Motors stock has been exploding higher in the past several months. The stock is currently trading at all-time high prices and looks ready 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 slightly above its rising key averages, which signals neutral to bullish price action in the near term.

TSLA

Source: Thinkorswim

Taking a look at the implied volatility 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

84.54%

90%

88%

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

November Options

Flat

Average

December Options

Flat

Average

As of Friday, there is 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.

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 Motors’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Tesla Motors look like and, more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

105.62%

113.95%

-1.27%

-66.67%

Revenue Growth (Y-O-Y)

1420.08%

1762.78%

677.88%

-13.13%

Earnings Reaction

14.34%

24.39%

-8.77%

8.92%

Tesla Motors has seen mixed earnings and rising revenue figures over the last four quarters. From these numbers, the markets have been buzzing about Tesla Motors’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

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

target=”_blank”>NYSE:GM

Tesla Motors

General Motors

Toyota

Ford

Sector

Year-to-Date Return

397.30%

22.89%

38.19%

35.6%

73.94%

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

Conclusion

Tesla Motors offers electric vehicles that consumers and companies are opting for over other luxury vehicles. Recent reports about the Model S catching on fire have spiked concern about the company. The stock has been exploding higher recently and is now trading at all-time high prices. Over the last four quarters, earnings have been mixed while revenues have been rising, which has left investors upbeat about the company. Relative to its peers and sector, Tesla Motors has been a year-to-date performance leader. Look for Tesla Motors to continue to OUTPERFORM.

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