startupSI
Quantus
Pearl
Bitcoin
Pudgy Penguins
Venice Token
Backpack
Tesla stock entered the October 19 trading week under pressure ahead of its third-quarter earnings announcement. Shares closed at $354.72 on Friday, down 8.7% from their October high of $388.56.
The decline followed renewed scrutiny of the company’s financial performance and spending on artificial intelligence projects. Meanwhile, options activity indicated interest in positioning around the upcoming earnings announcement.
Investors will assess Tesla’s vehicle margins, cash flow, and infrastructure spending when the company reports results on October 21.
Tesla’s Options Data Points to a Rebound
TSLA stock has retreated this month, but the options market suggests that it may rebound modestly after releasing its earnings report this week.
Data compiled by Barchart shows that options expiring on Friday have an implied volatility of 42%. This figure is much higher than the historical volatility of 33%.
However, the volatility figure is not particularly high, since Tesla shares historically don’t experience much volatility after earnings. Its most recent earnings report, however, was quite volatile, as the company announced a significant cash outflow.
Barchart data show that the company has a put/call volume ratio of 0.53, indicating it has more calls than puts. The put/call open interest of 0.49 also suggests that it has more bullish positioning.
A closer look at the options chain shows that call open interest is concentrated at the $370 strike, slightly above the current price. There are 61,240 call contracts at that level, well above recent figures.
Another strike with notable activity is $375, which holds 32,491 contracts. On the put side, most contracts are concentrated at $340. To be fair, options positioning does not always predict where an asset will trade.
Tesla Earnings to Provide Cues on AI Spending
The upcoming Tesla earnings report will have several moving parts. The first one is its revenue and earnings growth. Yahoo Finance data shows that analysts expect the upcoming results to show that its revenue came in at $28 billion. The most optimistic forecast among analysts is $30 billion.
Recent delivery numbers showed that Tesla sold 486,532 vehicles in the third quarter. Most of these vehicles were Model 3 and Y, with the other models selling 8,295. Its deliveries were relatively weaker than a year earlier because of the rush that happened late last year when Trump ended the tax credits.
The stock will react to several other metrics. For example, it will react to hints about its capital spending, which contributed to its cash burn in the second quarter. The company has signaled that it will continue spending, especially on the Terafab project. It is also spending on other products, including its Optimus and Cybercab projects.
The results will provide more hints on its revenue growth. Analysts expect Elon Musk to guide to an annual revenue of $107 billion, up by 13% from a year earlier. It will then grow by 13% to $121 billion next year, helped by the rising gasoline prices.
Tesla Stock Technicals Suggest a Retreat is Possible
Technicals have diverged from what the options market is pricing in. A closer look shows that the stock bottomed at $297 in July and then soared to a high of $387. It faced substantial resistance and pulled back to $345 earlier this month.
The stock then bounced back and retested the resistance at $387, a sign that it has formed a double-top pattern. Also, the two MACD lines have formed a bearish crossover, a sign that bears are gaining momentum.
Therefore, the stock is likely to break down, potentially reaching the key support level of $340. On the other hand, a move above $387 will point to more gains.
This article is for informational purposes only and does not constitute financial or investment advice. Stocks and options involve substantial volatility and potential capital losses. Investors should conduct independent research and consult a qualified financial adviser before making investment decisions.
