Is Tesla Motors a Good Portfolio Play?

With shares of Tesla Motors (NASDAQ:TSLA) trading around $218, 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 said it wants to study the remnants of a stolen Model S sedan that split in half and burned after a high-speed chase and collision in Los Angeles. The company led by Elon Musk is working with Los Angeles police and fire officials investigating the incident that began early July 4 when an unidentified man stole the Tesla and led police on a high-speed chase. He later collided with several vehicles in West Hollywood and split the car into two parts when he crashed into a lightpole, triggering a battery fire, according to police reports. He was injured in the incident and was taken into custody. “We’ve asked to take a look at the vehicle as soon as that’s possible,” Simon Sproule, a company spokesperson, said in a phone interview. “There aren’t so many S’s involved in major crashes, and certainly not quite like this one, so we absolutely want to have a look to understand what happened.” The Palo Alto, California-based company’s Model S, priced from $71,000, has a five-star rating for crashworthiness, the National Highway Traffic Safety Administration’s highest designation. Tesla added a titanium plate in March to further strengthen the casing that protects its lithium-ion battery after NHTSA reviewed crashes that triggered Model S fires.

T = Technicals on the Stock Chart Are Mixed

Tesla Motors stock has been moving higher in recent times. However, the stock is currently pulling back and may need time to stabilize. 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.

(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	54.42%	96%	94%

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
August Options	Average	Average
September 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 very significant 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 Increasing 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 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?

	2014 Q1	2013 Q4	2013 Q3	2013 Q2
Earnings Growth (Y-O-Y)	0%	-83.55%	-86.96%	105.82%
Revenue Growth (Y-O-Y)	10.46%	100.84%	1,102.65%	1,420.08%
Earnings Reaction	-11.3%	8.43%	-14.5%	14.34%

Tesla Motors has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Tesla Motors 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	45.34%	-7.77%	-1.30%	11.05%	1.66%

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 wants to study the remnants of a stolen Model S sedan that split in half and burned after a high-speed chase and collision in Los Angeles. The stock has been moving higher in recent times, but is currently pulling back. Over the last four quarters, earnings and revenues have been rising. However, investors have had mixed feelings about recent earnings announcements. Relative to its peers and sector, Tesla Motors has been a year-to-date performance leader. Look for Tesla Motors to continue to OUTPERFORM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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