Tesla's Q2 Earnings: Can the EV Giant Overcome Recent Setbacks?
17-07-2024
Earnings season continues next week with big tech figures set to be published on Tuesday July 23rd. Google, Microsoft and Tesla will all announce their Q2 earnings figures after the closing bell.
Tesla fell from grace, being the worst performer in 2023 of the previously heralded Magnificent Seven. As such, tech investors will be watching Tesla’s latest figures very closely as the troubled electric vehicle manufacturer continues to battle with increased competition from its Chinese rival BYD. Tesla previously reported $21.30 billion in revenue for Q1 2024, an 8.7% decrease from the $23.33 billion reported in Q1 2023.
Shifting industry pressures have made Tesla’s share price highly volatile in recent months. The company has faced supply chain disruptions, particularly with semiconductor shortages, delivering only 386,810 vehicles in the three months to March 31, down 20% from Q4 2023 and 8.5% from the previous year.
Its Earnings Per Share (EPS) figures, a critical indicator of the company’s profitability, were $0.45 in Q1 2024, falling short of expectations of $0.51. Analysts have currently forecast an EPS of $0.61 reflecting the recently reported improved operational performance which sent shares on an almost 40% rally over the past month.
The share price has logged an overall gain of ~ 3% year-to-date. Previous earnings calls this year have been periods of significant volatility – with the share price swinging in both directions – first dropping by 13% following the Q4 earnings call in January, then rallying by over 17% at the last Q1 earnings call in April.
Tesla Year-To-Date Earnings Calls 2024
Options offer investors a cost-effective way to gain leveraged exposure to volatility. If you believe that the upcoming Q2 earnings call on the 23rd of July will lead to a further spike in Tesla volatility, then you may consider buying a Long Strangle.
Long Strangle
Trade Idea
Long Strangle
Tesla Cash Price = $255 (as of 17/07/2024 at time of writing)
1 x 6.00 (option premium) x 100 (contract size) = $600 debit
1 x 6.00 (option premium) x 100 (contract size) = $600 debit
Total consideration of $1,200 (excl. fees + commissions)
This strategy requires a 12.5% move in either direction in order to breakeven.
A swing of 15% to either the $217 or $293 level by 26 July 2024 expiry would yield a 150% return on your initial investment, valuing the call or the put leg of the strangle @ $1,800 ((293-255) x 100)) or ((255-217) x 100)) and yielding a maximum profit of $600 per 1 lot ($1,800 – $1,200) (excl. fees + commissions)
Maximum loss $1,200 (excl. fees + commissions)
Defined risk profile, maximum loss is equal to the net option premium paid.
The contents of this article are for general information purposes only. Nothing in this article constitutes advice to any person and any investments and/or investment services referred to therein may not be suitable for all investors. If you’re unsure whether any investment is right for you, you should contact an independent financial adviser. For more information, please see Terms and Conditions | OptionsDesk.
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