by Ian Harvey
August 01, 2017
Tesla Inc. (NASDAQ:TSLA)
Here is an overview of Tesla Inc. a few hours after being suggested and before reporting earnings which will occur on Wednesday, after the market closes. This options trade was recommended on Monday, July 31, 2017; and has shown major potential profits within a few short hours of executing the trade.
The Quandary – Should you sell for a known profit and risk missing larger profits if the trade goes according to plan, or
…..Wait and see what pans out ?
The Suggestion……from "Earnings Predictions for the Week Beginning July 31, 2017"
The electric car company reports Q2 earnings after the market close Wednesday as production ramps up on the Model 3, the first of which will be delivered tonight. But doubts remain over Tesla's ability to reach its ambitious production goals as deliveries fell to 22,000 in Q2 from 25,000 in Q1. Consensus estimates have Q2 per-share losses widening to $1.80 from $1.61 a year ago, as investment poured in to get the Model 3 ready.
Option trade to consider: Buy the TSLA Aug 18 2017 315.00 Put at approximately $7.00.
Why the Pullback………..
Shares of Tesla fell 3% in midday trading on Monday after investors were not impressed by the automaker's Model 3 sedan launch late Friday at an event in its Fremont, California factory.
Analysts at Goldman Sachs GS called the event "a bit anticlimactic," noting no noticeable changes in the car's features from its earlier test versions. The Model 3 "remains a de-contented, smaller version of the Model S; and the production vehicle showed no incremental (human-machine interface) features from the vehicle unveiled last year."
"We believe the Model 3 was as good as or better than expected, and pricing was as expected with considerable initial up sell," Bernstein's Toni Sacconaghi wrote in a client's note on Monday. "That said, the rubber now hits the road, and the fundamental questions remain unanswered."
Sacconaghi also commented that "CEO Elon Musk sounds increasingly squeamish about the production ramp." Musk made a comment that Tesla is "going to go through at least six months of manufacturing hell" to produce the Model 3.
Tesla is counting on the success of its Model 3 to help make the company a profitable one. The company has already spent $2 billion in cash this year ahead of this launch.
Shares of Tesla turned lower on Monday, the first market session after the Silicon Valley car maker launched the Model 3, its electric car aimed at the masses, and promised a fast ramp-up for the sedan’s production.
The stock opened more than 2% higher, but such gains had evaporated by mid-morning. Later in the session, the shares traded lower, on pace to close at their lowest in more than two weeks.
The Goldman analysts said they expect Tesla to post a larger-than-expected quarterly loss when the company reports Wednesday, saying they expect gross margins on vehicles to disappoint.
Within a few short hours this trade produced a potential profit of 72%!
ACTION TO TAKE
The results say it all!