The shares of the electric vehicle manufacturer reached historic records. It has become the most valuable company ever added to the S&P 500 Index (SPX). And, with a little rounding, the company reached the promised goal of half a million deliveries.
As investors tend to observe production and delivery numbers closely, it is an important milestone that Tesla Inc (NASDAQ: TSLA) said it delivered 180,570 vehicles in the last three months of 2020, bringing the total deliveries for the year to 499,550.
In January 2020, the company said deliveries should “comfortably exceed” that milestone. But investors can probably forgive TSLA for not technically reaching the 500,000 mark, given the madness that was 2020, when TSLA had to suspend production in California and China because of the coronavirus.
Looking at TSLA’s fourth quarter earnings report and conference call after closing on Wednesday, investors will likely want to hear more details about production, especially after CNBC reported a planned 18-day shutdown of the Model S lines and Model X in California. This may suggest that the company is not seeing as high demand for these older lines as it is for newer models.
Shanghai model Y begins production
Speaking of newer models, investors are probably eager to hear more about how production of the Model Y is going in China. In the January press release announcing the latest production and delivery numbers, TSLA also said that production of its Model Y had started in Shanghai. The company said in Twitter Inc (NYSE: TWTR) that deliveries of vehicles made in China started earlier this month.
China is an important market for Tesla. At the launch of the third quarter, it had installed capacity for 250,000 models 3 at its Shanghai plant. It may be interesting to see how much capacity it says is installed there for the Model Y, assuming it releases that data for the fourth quarter.
Not all went well for the TSLA in the Asian nation. In October, the China State Administration for Market Regulation said TSLA was recalling more than 48,000 S and X models due to possible suspension problems. This month, a Model 3 reportedly caught fire in Shanghai, probably after damage to the battery.
This was not the only headache related to TSLA security. Earlier this month, the United States National Road Traffic Safety Administration asked the electric vehicle manufacturer to recall approximately 158,000 S and X models due to problems with the touch screen.
It may be interesting to see if the TSLA leadership thinks the recall issues are material enough to be mentioned in its earnings press release or related conference call, and how they can answer any questions they may receive from recall analysts.
TSLA earnings and options activity
The TSLA is expected to report earnings after closing on Wednesday. Third-party analysts seek consensus estimated earnings of $ 1.00 per share, vs. US $ 0.41 a year ago in revenue of $ 10.32 billion– about 39.7% above quarterly revenue in the same quarter of the previous year.
The options market has been pricing a expected 4.7% share price movement in any direction around the disclosure of results, according to the Market Maker Move ™ indicator on the thinkorswim® platform.
Looking at the expiration of the options on January 29, the put options are active in 700, 750 and 800 strikes. The highest concentrations were seen on the positive side, with a high volume of calls in the 850 and 900 strikes, even more so in the 1000 strike. The implied volatility is at the 15th percentile on Monday morning.
Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price for a specified period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a period of time.
The electric vehicle race
Meanwhile, the company appears to continue to accelerate solidly as electric vehicles become more popular, not in small part due to the TSLA itself.
As interest accelerates, TSLA competition is also heating up. Notably, Ford Motor Company (NYSE: F) and General Motors Company (NYSE: GM) have entered the waters of the EV and its investors apparently see this as a positive thing. This is a long-term concern for TSLA because F and GM are already talented car manufacturers with years of experience that they can bring to the construction of EVs.
And across the Pacific, recent competitors like Nio Inc (NYSE: NIO) are in the TSLA’s rearview mirror and appear to be picking up speed.
Still, batteries remain the main ingredient for electric vehicles and TSLA has a strong position there. So it seems that while other companies are gaining momentum in the EV space, a real competition problem may lie a little further for TSLA.
Despite the gap in its battery capacity, as well as a series of profitable quarters, much of TSLA’s assessment was based on future performance potential rather than current fundamentals.
With a recent price / earnings ratio north of 1,600% and a stock price that rose almost 640% in the year through Friday’s close, cautious investors may want to see more about how the fundamentals are shaping before diving into these. levels.
Perhaps the fourth quarter earnings report will provide more clarity.
TD Ameritrade® comments for educational purposes only. SIPC member. The options involve risks and are not suitable for all investors. Please read Characteristics and risks of standardized options.
Tech Nick’s photo at Unsplash
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