Will Tesla Motors Break Higher?

With shares of Tesla Motors (NASDAQ:TSLA) trading around $126, 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 is apparently in negotiations with South Korean firms LG Chem and Samsung SDI to help supply it with the needed batteries for its cars, though Tesla’s vice president of investor relations, Jeff Evanston, acknowledged that it would take several years before other companies — in addition to Panasonic, its current supplier — were qualified to supply batteries to Tesla. The news comes shortly after Tesla expanded its agreement with Panasonic.

T = Technicals on the Stock Chart Are Mixed

Tesla Motors stock has been exploding higher in the past several months. However, the stock is currently pulling back and it may need time to consolidate before heading higher. 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 between its rising key averages, which signal neutral price action in the near-term.

TSLA

(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

68.04%

26%

23%

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

Put IV Skew

Call IV Skew

December Options

Average

Average

January Options

Average

Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral 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 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 Q3

2013 Q2

2013 Q1

2012 Q4

Earnings Growth (Y-O-Y)

-86.96%

105.62%

113.95%

-1.27%

Revenue Growth (Y-O-Y)

1102.65%

1420.08%

1762.78%

677.88%

Earnings Reaction

-14.50%

14.34%

24.39%

-8.77%

Tesla Motors has seen mixed earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have had conflicting feelings 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), Ford (NYSE:F), and sector?

Tesla Motors

General Motors

Toyota

Ford

Sector

Year-to-Date Return

277.70%

33.30%

35.66%

30.97%

34.31%

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. The company is in negotiations with South Korean firms LG Chem and Samsung SDI to help supply it with the needed batteries for its cars. The stock has been exploding higher in the past several months, but it’s currently pulling back. Over the last four quarters, earnings have been mixed while revenues have been rising, which has left investors with conflicting feelings about the company. Relative to its peers and sector, Tesla Motors has been a year-to-date performance leader. WAIT AND SEE what Tesla Motors does this quarter.

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