Tesla Inc. has been facing significant drama and reputational challenges, particularly since CEO Elon Musk became more involved in politics. Despite the turmoil, the company’s stock may be due for a rebound.
Recent Sales Data
Sales data for electric vehicles has shown declines in Tesla’s market share in various regions. In Germany, Tesla’s sales plummeted 59.5% in January, while EV battery sales increased 53.5% year-over-year. This suggests that the decline is specific to Tesla, rather than a broader issue with the EV market.
Impact of Elon Musk’s Politics
A Brand Finance survey revealed that some respondents are hesitant to recommend or consider buying a Tesla vehicle due to Elon Musk’s controversial political stance. This perception could be contributing to the decline in sales.
Sales in China
Tesla sold 63,238 China-made vehicles in January, a 11.5% decrease from the same period last year. The company faces significant pressure from domestic Chinese competitors, which are experiencing robust increases in market share.
Insider Selling
Kimbal Musk, Elon’s brother and a director at Tesla, along with other insiders, sold millions of dollars’ worth of shares. While insider selling can occur for various reasons, it may not be an encouraging development for investors seeking positive headlines.
Investors Are Incentivized To Play The Numbers Game
Despite the challenges, investors may find opportunities in Tesla’s stock. The company’s volatility appears manageable, and the numbers favor taking a long position in Tesla.
- Stochastically, Tesla’s stock has an upward bias, with a 53.26% chance of rising by the end of the week and a 55.43% chance over a four-week basis.
- If Tesla’s stock loses no more than 5% of its value during a one-week period, the long odds for the subsequent week stand at 55.07%, and the chances of upside improve to 60.71% over the next four weeks.
Plotting An Effective Options Strategy
Assuming Tesla’s stock loses around 5% of its value this week, the statistical framework leans to the bullish side of the spectrum over the next four weeks.
- The median return in this scenario is 13.59%, while the median loss under the negative scenario is 9.2%.
- A possible strategy is the 330/415 bull call spread for the March 7 expiration date, which involves buying the $330 call and selling the $415 call.
- However, this trade requires a significant net debit and may be expensive.
- Alternative options include choosing spreads where both calls are out of the money (OTM), which can be more aggressive but potentially more rewarding.
By analyzing the numbers and understanding the market dynamics, investors can make informed decisions about their investment strategy and potentially capitalize on Tesla’s rebound.