Tesla (TSLA) Earnings Preview: What to Expect After Recent Price Cuts?
Apr 18, 2023
Tesla reports earnings on Wednesday, April 19th after the market closes.
The company is expected to announce $0.85 earnings per share (EPS), alongside an estimated $23.36 billion in revenue. The EPS figure is a significant drop from last quarter, which aligns with the company’s recent price cuts across the board, likely in an attempt to strengthen brand loyalty and increase new customer sales.
The implied volatility of the options market projects an expected move of +-12.51 for the rest of the week in TSLA, as of Tuesday the 18th, which is under 10% of the stock’s price. This is relatively low for any stock, especially a typical high-flier like TSLA.
TSLA is up almost 40% YTD, but that doesn’t tell the whole story – the stock is well below the recent high of $314.67 realized in August of 2022. The selloff down to $101.81 was worrisome for investors, but the recent rally brings hope that the recent price cut strategy could pay dividends into the future – quarterly results and 2023 guidance is on the horizon this week.
The implied volatility environment in the options market can tell us a lot about what the market perceives from the earnings announcement for itself – the expected move of TSLA’s stock price is +- $12.54 for the rest of the week – this includes the earnings announcement.
Looking further into the May options cycle and the December cycle, this $12.54 expected move makes up a pretty large chunk of the expected move for the next thirty days (+-$22.53), but not necessarily a big chunk of the expectation for the rest of the year as shown in the expected move in the December cycle (+-$62.65).
With TSLA trading at around $185 on Tuesday the 18th, we can see that equidistant out-of-the-money (OTM) options at 170 and 200 are trading for roughly the same value – this tells us that the market does not perceive any sort of high-velocity move to be on either side – if the market did, one of these options would be trading for a higher price than the other.
This doesn’t mean the stock is going to stay where it is, it just means that there isn’t a skew in either direction in terms of where a high-velocity move is perceived to be.
With all of this said, a $12 expected move on a $185 stock price is relatively low, which is uncharacteristic of TSLA’s earnings reports historically – We’ll know on Thursday if the market is right and TSLA barely moves, or if there is a big move in TSLA and the implied volatility was off.
Tune in for the fireworks (or lack of fireworks) on Wednesday, April 19th after the market closes at 3pm CST.
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