Analyst Says Sell Tesla Stock on Model 3 Concerns

Short-term options traders are unusually put-skewed toward the electric car stock

Managing Editor
Jul 19, 2018 at 9:21 AM
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Shares of Tesla Inc (NASDAQ:TSLA) are 2.3% lower in electronic trading, after Needham downgraded the electric car manufacturer to "underperform" from "hold," citing uncertainty around the company's rising Model 3 production cancellations. Analyst Rajvindra Gill said wait times for the Model 3 could be pushed out to 2020, compared to the current average around four to 12 months.  

Looking at the charts, Tesla stock has been choppy, with the equity most recently reacting to news the company plans to build a factory in China and TSLA CEO Elon Musk's Twitter rants. The equity closed last night at $323.85, just 4% above its year-to-date breakeven level, though, and a pullback earlier this month was contained by its 80-day moving average.

Digging into options data, TSLA stock's Schaeffer's put/call open interest ratio (SOIR) of 1.61 ranks in the 86th annual percentile. This high ratio suggests that speculators targeting options expiring within three months are much more put-heavy than what's typically been seen over the last 12 months.

This apparent skepticism is seen outside of the options pits, too. Although short interest on TSLA fell 11.5% during the past two reporting periods, it still accounts for nearly 28% of the stock's total available float. At Tesla stock's average daily trading volume, it would take nearly four days for shorts to cover their bearish bets.


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