Will Tesla Motors Surge Higher After Recent News?

With shares of Tesla Motors (NASDAQ:TSLA) trading around $254, 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 Motors, which plans to build the world’s largest battery factory, said it will open more than 30 new service centers and stores in Europe as it anticipates a jump in sales in that region and Asia. Tesla expects combined sales this year in Europe and Asia to be almost twice those in North America, according to a statement today from the Geneva auto show. The company said it will introduce right-hand-drive versions of its Model S sedan in the UK and offer leasing and financing programs in Europe. The electric-car maker has forecast a more than 55 percent jump in global sales in 2014 and announced plans to spend as much as $5 billion to build a so-called gigafactory in the U.S. The facility would let the company create cheaper versions of its cars, potentially doubling its worldwide market share to about 1 percent, Adam Jonas, a Morgan Stanley (NYSE:MS) analyst, said. Tesla delivered almost 22,500 vehicles last year.

T = Technicals on the Stock Chart Are Strong

Tesla Motors stock has been surging higher over the last couple of months. The stock is currently trading near all time highs and looks poised 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.

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

59.20%

13%

10%

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

April Options

Flat

Average

May 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 minimal 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 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 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)

-83.55%

-86.96%

105.62%

113.95%

Revenue Growth (Y-O-Y)

100.84%

1102.65%

1420.08%

1762.78%

Earnings Reaction

8.43%

-14.5%

14.34%

24.39%

Tesla Motors has seen mixed earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have been pleased with 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 Motor (NYSE:TM), Ford Motor (NYSE:F), and sector?

Tesla Motors

General Motors

Toyota Motor

Ford Motor

Sector

Year-to-Date Return

70.11%

-10.20%

-5.66%

-0.58%

14.41%

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 said it will open more than 30 new service centers and stores in Europe. The stock has been surging higher and is currently trading near all-time highs. Over the last four quarters, earnings have been mixed while revenues have been rising, which has left investors pleased. Relative to its peers and sector, Tesla Motors has been a year-to-date performance leader. Look for Tesla Motors to OUTPERFORM.

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