Earnings: TSLA, BABA and MGM Shine Light on Economy

The earnings parade continues in full force with quarterly results out of auto-industry disruptor Tesla Motors, Inc. TSLA, China’s e-commerce giant Alibaba Group BABA and gaming empire MGM Resorts International MGM.

Tesla Troubles?
TSLA has bled through more than $2.9 billion the last six quarters, according to the Wall Street Journal, as it has dealt with starting production and then massive shortages that derailed deliveries on its Model X. This is a problem TSLA has since solved and vowed not to repeat with the Model 3.

But if the stock value is any indication, investors still support the company and its promise to disrupt the auto industry with its electric cars. Share prices are up more than 575% since 2013, and up 62% since its 2016 bottom in mid-February. That’s even factoring in the 12% decline in the last month.

When Q2 results were released ahead of the market open Wednesday, analysts at Thomson Reuters were pegging a $0.60 a share loss, on average, dropping considerably deeper since the $0.36 a share loss a year ago. Revenue, however, is projected to surge by 45% to $1.60 billion.

Short-term option traders have priced in a potential 7.5% share price move in either direction around the earnings release, according to the Market Maker Move indicator on the thinkorswim® platform by TD Ameritrade.

Ahead of earnings many options traders were active in the May 210-strike puts. As for calls, traders have been active in the May 250 strikes. The implied volatility is at the 39th percentile. (Please remember past performance is no guarantee of future results.)

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price and over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

Analysts reporting to Thomson Reuters are anticipating a per-share profit of $3.63 on revenues of $23.1 billion. That’s substantially better than a year ago when BABA posted a profit of $2.98 on revenues of $17.4 billion.

Short-term option traders have priced in a potential 5.25% share price move in either direction around the earnings release according to the Market Maker Move indicator.

Ahead of earnings, buyers were active at the May 76-strike puts as well as the May 80-strike calls. The implied volatility is at the 40th percentile.

At Thomson Reuters, the expectations are for a profit of $0.11 per share, compared with last year’s $0.33 a share, on revenues that are projected to be flat year-over-year at $2.3 billion.

Short-term option traders have priced in a potential 6% share price move in either direction around the earnings release according to the Market Maker Move indicator.

Ahead of earnings, buyers were active at the 20.5-strike puts as well as the 20-strike calls. The implied volatility is at the 33rd percentile.

Inclusion of specific security names in this commentary does not constitute a recommendation from TD Ameritrade to buy, sell, or hold.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
The information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
TD Ameritrade, Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2016 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.