Schaeffer's Trading Floor Blog

Tesla Motors Inc (TSLA) Earnings: The Epilogue

A postmortem analysis on TSLA

by 5/9/2014 7:30 AM
Stocks quoted in this article:

Unless you're on a space station or camping outside Radio City Music Hall for the NFL draft, you probably already know about the Tesla Motors Inc (NASDAQ:TSLA) earnings report. But hey, if you don't

Adjusted earnings per share came in at $0.12 per share, which was higher than the $0.07 expected by analysts surveyed by Bloomberg.
During the quarter, the company produced 7,535 models S and delivered 6,457.

"While [deliveries] exceeded the average of seven analysts' estimates, it was less than the highest estimate," reported Bloomberg's Alan Ohnsman.

I'm not sure about the "whisper" estimates here, but clearly TSLA missed that "metric," judging by the stock's reaction afterwards. (Click chart to enlarge.)

Intraday Chart of TSLA on May 8
Chart courtesy of TD Ameritrade

There's some thought that earnings guidance going forward was "light." That would, of course, make Tesla the first high-beta stock ever to low-ball future guidance so it could then fly over it next quarter.

But, as is almost always the case, these reactions have precious little to do with the actual news, and everything to do with the overall backdrop. It's not much of a secret that All Things Momentum have gotten slammed the past few months. And TSLA is as close to the poster child for that pseudo-group as any stock out there. OK, maybe Twitter Inc (NYSE:TWTR) can make that claim, too; let's call them dual poster children.

I noted the other day that TSLA options priced in about a 9% move. My guess on the reaction was lower, but within that 9% parameter. Hey, half right! My thought was that the stock was going to start moving out of that down channel of the last few months. But this earnings move keeps the stair-step lower pretty much intact. (Click chart to enlarge.)

Daily chart of TSLA since November 2013
Chart courtesy of TD Ameritrade

The "VIX" of TSLA dropped from 71 to about 55 after the news. The 10-day realized volatility in TSLA has been all over the place in the last half year, as you can see in the above chart, but it averages about mid-50s, so the options look reasonably fair for the moment. Having said that, when bubbly names tamp down, the realized volatility tends to trend lower as well. So, as much as TSLA has flown around in 2014, I wouldn't go buying much in the way of "time" here. It's entirely possible that the next trend here is one of simply reduced volatility.

It's interesting that the market itself has hung in well this week, while both TWTR and TSLA got hit pretty hard. On one hand, I guess it's a flight to more stable names, which isn't so bad. On the other hand, big rallies are almost always accompanied by a few monster momentum names that everyone points to and yells "BUBBLE!" New names can always emerge, so time will tell.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

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