Is Tesla an Attractive Investment?

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With shares of Tesla Motors (NASDAQ:TSLA) trading around $198, 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?

Fans who believed that Fisker Automotive posed a verifiable threat to the operations, sales, and strategy of their beloved Tesla Motors were likely relieved when the maker of the Karma plug-in hybrid went south in a rather spectacular fashion, but the story doesn’t end there. The remains of Fisker were picked up by a Chinese firm led by billionaire Lu Guanqiu, who has promised to resume production of the vehicle and, more recently, pledged whatever means necessary to do battle with the world’s most eminent electric car maker, though he didn’t name names.

T = Technicals on the Stock Chart Are Mixed

Tesla Motors stock has struggled to make progress over the last couple of quarters. However, the stock is currently trending higher 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 between its rising key averages, which signals 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

43.26%

3%

0%

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

Put IV Skew

Call IV Skew

June Options

Average

Average

July Options

Average

Average

As of Tuesday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very small 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.

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