All Charged Up
THIS IS MY FAVORITE STOCK OF 2017. WE HAVE ALREADY MADE 400% RETURN ON OUR POSITION IN JUST THREE WEEKS.
To me there are fewer setups that look as appetizing as Tesla this year. The stock has been lashed out at by bears for two years and has seemingly had everything thrown at it. With that, and barring a completely overall bear meltdown, I find it hard for the investors in the stock to ring the register this year.
TSLA has been consolidating on a monthly basis.
With the slated Model 3 deliveries, 2017 marks the year that the Tesla mass consumer comes online. With that comes a new revenue stream and the growth dynamic back into play.
The automaker took 400,000 pre-orders for the Model 3 within weeks of revealing the prototype. The main issue they face is producing millions of them, on time, up to quality standards, and most importantly; without losing money. Tesla doubled their production in 2016 to 100,000 cars. In April, Musk said he wants to produce half a million cars by 2020. One month later, he said they’d get there by 2018. Aggressive as that may be, Musk seems to deliver under pressure. The Model 3’s biggest hinderance on performance deliveries are projections, expectations, and supply chain. With expectations coming as a result of projections, supply chain will be your tell with the company’s ability to deliver results.
Competition:
Many analysts who bash Tesla’s stock will have you know that there is a steady increase in competition in recent years. They’re full of shit. Tesla operates in the high end electric vehicle market. Until now, they’ve been the only real player. Recently Fisker, Farady Future , and Lucid Motors have perked up to compete but until now there really hasn’t been a viable competitor.
The main difference however is that Tesla has centered itself on building a network and working outward. SImilar to the Apple vs everybody model, Tesla has open sourced its technology and focused its attention on building a sustainable network/brand first then focus on its product offerings. That’s why the term “Cult Stock” has often been used to describe the company/stock.
Now What?:
As I’ve said above, Tesla has been range bound for nearly two years now. In early 2015, the stock broke it’s 180 “support” level and found itself bouncing sharply off of its 200 week MA. Since then the stock made a high at nearly 270 and then a failure and hold of the 180 level yet again. As of late the stock has once again broken out of its downtrend and appears to be acting constructively. With the addition of Elon Musk to the Trump Advisory team, the short interest, new product offering, and constructive behavior, this stock is set to rip in 2017.
One key amendment to this argument is the price of oil. Which since the Barron’s $20 oil cover, has been constructive and working its way higher. All of these instances bode well for Tesla which I believe has a very defined stop ($180) and a potential to break out to an all time high.
ONE LAST POINT:
TSLA’s gigafactory goes active in 2017 making them the largest battery operator/manufacturer in the world. This will provide countless jobs as well as margin expansion. This will likely bode well for TSLA moving forward with the Trump Administration and as such bears are going to get squeezed.
The $TSLA Play:
To play this stock’s potential, I’ll be putting on a leaped call spread (bullish risk reversal) with the Jan 2019 350 C being bought and the Jan 19 100 P being sold. (You can also buy a lower put strike to hedge your downside risk as well.) This prices that Tesla will see a 50% gain in the next two years which “sounds crazy” but isn’t anywhere near crazy given this stock’s price action/ability. At the time of writing, this position cost a net debit of ~$2.2.