Is Tesla Motors a Good Portfolio Play?

With shares of Tesla Motors (NASDAQ:TSLA) trading around $140, is TSLA an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Tesla Motors designs, develops, manufactures, and sells electric vehicles and electric vehicle powertrain components. The company also provides services for the development of electric powertrain systems and components, and sells electric powertrain components to other automotive manufacturers. It markets and sells its vehicles through Tesla stores as well as over the Internet. Consumers and companies are looking to save at the pump, and what better way to do so than with electric vehicles?

With Tesla shares sliding in early Thursday trading, the news of a garage fire in California is overcoming the recent announcement that Tesla will be adding capacity at its Fremont, California, factory to produce 35,000 more vehicles per year — not to 35,000, but 35,000 more vehicles. The state of California is negotiating tax breaks for Tesla that will allow the company to save about $37.4 million toward the purchase of $415 million worth of equipment to facilitate the expansion, as the state is confident that the investments will provide an economic boon down the road that will be greatly more beneficial for California than the tax money collected up front. Tesla is slated to roll 21,500 units of its Model S sedan off the line this year, so the added capacity would allow the company to more than double its current production rate. Moreover, it will help alleviate concerns and fears that the company's current output will hinder its future opportunities for meaningful growth.

T = Technicals on the Stock Chart Are Mixed

Tesla Motors stock has been pulling back over the last couple of months. The stock is currently trading sideways and may need time to stabilize before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Tesla Motors is trading between its rising key averages, which signal neutral price action in the near-term.

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Tesla Motors options may help determine if investors are bullish, neutral, or bearish.

	Implied Volatility (IV)	30-Day IV Percentile	90-Day IV Percentile
Tesla Motors options	56.57%	30%	28%

What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.

	Put IV Skew	Call IV Skew
January Options	Average	Average
February Options	Average	Average

As of today, there is an average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Tesla Motors’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Tesla Motors look like and more importantly, how did the markets like these numbers?

	2013 Q3	2013 Q2	2013 Q1	2012 Q4
Earnings Growth (Y-O-Y)	-86.96%	105.62%	113.95%	-1.27%
Revenue Growth (Y-O-Y)	1102.65%	1420.08%	1762.78%	677.88%
Earnings Reaction	-14.50%	14.34%	24.39%	-8.77%

Tesla Motors has seen mixed earnings and increasing revenue figures over the last four quarters. From these numbers, the markets have been pleased with Tesla Motors’s recent earnings announcements.

P = Excellent Relative Performance Versus Peers and Sector

How has Tesla Motors stock done relative to its peers, General Motors (NYSE:GM), Toyota Motor (NYSE:TM), Ford Motor (NYSE:F), and sector?

	Tesla Motors	General Motors	Toyota Motor	Ford Motor	Sector
Year-to-Date Return	317.60%	39.89%	27.15%	18.19%	29.41%

Tesla Motors has been a relative performance leader, year-to-date.

Conclusion

Tesla Motors offers electric vehicles that consumers and companies are opting for over other luxury vehicles. The company will be adding capacity at its Fremont, California, factory to produce 35,000 more vehicles per year. The stock has been pulling back and is currently trading sideways. Over the last four quarters, earnings have been mixed while revenues have been rising, which has left investors pleased. Relative to its peers and sector, Tesla Motors has been a year-to-date performance leader. WAIT AND SEE what Tesla Motors does this quarter.