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Does Tesla’s Upbeat Revenue Guess, Product Spin Conflict?

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November 3, 2015
Earnings outlook for Tesla Motors, the luxury electric car maker.

Tesla Motors (TSLA)—a stock that might be compared to traditional auto makers but may also fold into some environmental and technology-focused portfolios—is among a small fleet of companies issuing earnings results post-close Tuesday.

The luxury electric car maker has admitted repeatedly that engineering and battery-charging issues have dogged aggressive efforts to get its cars off the assembly lines and onto the driveways of customers. So, Wall Street has said it wants news on deliveries as well as insight on what’s ahead for current and new models when TSLA reports Q3 figures later today. TSLA’s Chief Executive Elon Musk favors features including double-hinged “falcon wing” back doors and adjustable back-row seats, for example. He’s admitted bells and whistles are partly behind the late delivery of the Model X SUV. But he may also use tonight’s forum to soothe the Street.

Analysts also will be listening for an update on the Gigafactory, its cell-production plant planned for 2016, as well as insight on its Model 3 and Tesla Energy, a battery system for homes, businesses, and utilities that Musk told reporters could “change the way the world uses energy at an extreme scale,” according to numerous published reports.             

Analysts polled by Thomson Reuters expect results to head in reverse from the year-ago comparable.  Their consensus pegs the quarter at a loss of $0.48 a share compared with a gain of $0.02 cents a share in Q3 last year. But revenues are expected to expand 36% to $1.26 billion, which may be a more significant market-moving number.

Although several Street analysts think Q3 results may be baked into the share price (figure 1).  

TSLA-stock-chart

FIGURE 1: PEAKS AND VALLEYS.

Tesla's (TSLA) year-over-year stock chart looks like a mountain range. Shares are down nearly 15% since this period last year, hitting a low of $185 in March and an intra-day high of $286.65 on July 20. Since then, the stock is down almost 27% and has been on a mostly downward trajectory since mid-September. Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

As for short-term market indicators, TSLA’s implied volatility has advanced just since last week, hitting the 67th percentile. Call options are trading at 1.25 times their normal volume, while put option trades are 1.5 times higher. TSLA stock trades are running at 1.3 times their historical norm.

Traders are pretty well spread out on TSLA. On the put side, we’re seeing buyers in the 200, 195, and 190 strikes in the weeklies. On calls, the buyers are favoring the weekly 215, 225, and 230 strikes.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price and over a set period of time; while put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

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