February 24. This is the day Russia invaded Ukraine. A gallon of regular, unleaded gasoline costs US consumers an average of $3.54, according to the AAA. That average went up by almost $1 after just three weeks. According to MarketWatch, searches for electric vehicles popped up by 112% from February 24 to March 8 on Cars (dot com), a news and pricing site that covers both electric cars and conventional vehicles powered by an internal combustion engine. Dividing that, searches for used electric vehicles are up 130% and 83% for new electric vehicles.
West Texas Intermediate crude is down 5% as investors hope peace has a chance in Eastern Europe. However, the near-month futures contract is trading above $104 a barrel. No wonder interest in electric cars is high. There was a lot of interest before there was a war that led to sanctions that eventually affected the world’s largest exporter of crude oil. Orders for new Tesla-made vehicles (TSLA) have seen a 100% increase in certain areas of the country hardest hit by rising gasoline prices, according to Electric.
The truth is that Tesla can’t keep up with demand. The backlog of new orders does not increase or speed up the ability to deliver. The company’s facilities in Fremont, California and Shanghai, China were running below capacity due to shortages in various parts, and Covid. New facilities in Texas and Germany are not yet online and may take some time to ramp up their production capacity. Next door knocks help a little. Few manufacturers of pure electric vehicles other than Tesla can produce cars of an acceptable scale. Old automakers such as Ford Motor (F) and General Motors (GM) have had to limit orders for many popular electric vehicles in order to allow their ability to build said vehicles a chance to catch up.
This might sound like a good problem. Well, let’s just say it’s better (a lot better) than no interest.
On January 26, Tesla reported one injury in the fourth quarter. Adjusted earnings per share of $2.54 easily beats the consensus. The company generated $17.72 billion in profit, up 65% year over year, and outperformed Wall Street by more than $1 billion. Adjusted gross margin was 30.6% versus the 29.9% Wall Street was considering. Operating margin improved to 14.7%, while fee cash flow of $2,775 billion was up 48.5% year over year and up 109% sequentially. For the quarter, Tesla produced 305,840 cars and delivered 308,650 vehicles, mostly Model 3 and Y. Tesla has become a beast. With $17.707 billion in cash, a current ratio of 1.37, and $4.285 billion in long-term debt, the balance sheet was much stronger than most people realize.
However, the stock was already in a downtrend by then, and even reporting a great quarter did nothing more than pause the sale. TSLA was deemed an “overvalued” stock and a “growth” stock. The company has guided the mysterious way it’s always done, toward delivery growth averaging 50% per year going forward. Growth stocks sold off on Wall Street in 2022. So far, TSLA is still trading at 75 times future earnings. Not cheap by any stretch. It was traded 96 times on January 27. The company reports the first quarter on or around April 22nd. Wall Street is looking at adjusted earnings per share of $2.25, which compares well to $0.93 for the prior year equivalent period, and revenue of $17.6 billion, which would be good for growth of about 69%.
Some of you may remember this scheme…
…the right side of the double bottom pattern we talked about on January 27th never developed. Now, we draw the Pitchfork diagonally downward instead of the incomplete “W”…
I’m a long stock, but only about half of what I was a hundred dollars ago. Is it time to re-add the sold stock. Am I cashing in on my center balance even though I will now do so at a loss? What I think I would do is sell my last share of the stock at $750 if there was a trade in there…that’s the point of panic, which is why I have panic points…so I can act with great accuracy when I have to.
However, I think I like the idea of adding the $800 Apr 22 calls for about $50, while I’m selling the same on Apr 22, $830 for about $40. A net deduction of $10. The more adventurous can sell it on April 22nd at $720 for about $50. This raises a trade that opens the trader to equity risk at $720 in cost to a net credit of $40. In the worst case scenario, the trader would end up with shares on a net basis around $680, with the shares trading at less than $720.
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