Thursday, May 9, 2013

Tesla (TSLA) - Earnings Explosion Spectacle Hides Vol Shift -- This is a New Company -- A Paradigm Shift is Complete

TSLA is trading $73.32, up 31.4% with IV30™ down 7.8% off of earnings. The LIVEVOL® Pro Summary is below.

Tesla Motors, Inc. is an electric vehicles and components manufacturer. The Company manufactures electric vehicles and electric vehicle powertrain components. It produces electric cars, from sports cars to mass-market vehicles.

This is a vol note off of a spectacular earnings report (or so says the equity market) for TSLA. There is a compelling phenomenon regarding the implied vol hidden in the wildness that is the stock move and in my opinion signals a paradigm shift for the firm.  This is a new company, starting today. Here's a news snippet from the earnings report:

Tesla Motors (TSLA) stock was up 22% in midday trading, after opening up nearly 26% to a new high, driven by better-than-expected Q1 results reported late Wednesday.

The luxury electric car maker delivered its first-ever profit and tripled analyst expectations. Tesla's shares already were up 65% this year going into the Q1 report.

"We exceeded our own targets for deliveries, significantly expanded gross margin and improved execution throughout the company.

"... Importantly, we achieved profitability despite the benefit of a one-time accounting gain related to the DOE (Department of Energy loan repayment) warrant," Tesla CEO Elon Musk said in a Q1 shareholder letter.

Tesla reported earnings per share minus items of 12 cents, triple what analysts expected. That compares with a 76-cent loss in the year-earlier quarter. Revenue jumped to $561.8 million from $30.2 million in the year-earlier quarter, before Model S production began. Analysts had expected $496.2 million. Tesla had pre-announced at the end of Q1 that sales had topped 4,750 units, ahead of its outlook, and that it would hit profitability. The company said Wednesday that it produced more than 5,000 vehicles and counted 4,900 in its revenue figure.

Source: via Yahoo! Finance Tesla Motors Rallies On EPS Smash, But What's Next?, written by DONNA HOWELL.

Well there you go... Let's start with the two-year Charts Tab, below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

We can see an awesome price appreciation for TSLA over the last two-years from $28.33 to now over $70. More myopically, since Jan 2 of this year, the stock has more than doubled. As we can see in the chart, the stock has smashed through all-time stock price highs. But this is actually a vol note, so let's take a look at the two-year IV30™ chart in isolation.

Here's what I see... Earnings rises into each earnings event (the blue "E" icon) and then crushes down after the news - that's normal behavior and repeats hypnotically for essentially every stock in the world that trades options. But take a closer look at the vol crush today (after earnings just came out). What you'll see is, no crush at all. There's certainly a small dip, but nothing like the prior cycles. In fact, we'll see in a bit that Jun vol (and all forward months) has some incredibly unusual behavior after this earnings news. As of this writing, TSLA IV30™ is in the 86th percentile (annual) -- that is, it's sill quite elevated even though earnings just came out.

Let's turn to the Options Tab for the most interesting part of this vol story.

We can see that while May vol is down 18.3 vol points (see the small green numbers across the top in parenthesis for day change), Jun vol is up 1.2 vol points... yeah, earnings are out, yet the second month shows higher vol... as does Sep, Dec, Jan '14 and Jan '15. Yeah, across the board outside of the front month, the option market reflects greater risk in TSLA stock from the short-term to the multi-year long term.

This is called a paradigm shift (well, that's what I call it) -- this company is now seen as a riskier entity. That's not bad news, in fact, for TSLA it's based on extraordinarily good news (earnings results). But TSLA is now a different company... and in this case, good for them... next level please...

This is trade analysis, not a recommendation.

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