27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Tesla Motors Inc (NASDAQ: TSLA) shares are down Wednesday morning, partially on the back of a bearish research note from Germany's Berenberg. Analyst Adam Hull is recommending investors sell the stock on poor gross margins and lowered earnings expectations.
The crux of Hull's investment thesis centers on Tesla's profitability. "Excluding government incentives, Tesla's true core gross margin in the luxury large car segment is not the headline 23% in 2015, but perhaps c17% whereas Mercedes and BMW achieve 35-40%," he wrote.
ENTER TO WIN $500 IN STOCK OR CRYPTO
Enter your email and you'll also get Benzinga's ultimate morning update AND a free $30 gift card and more!
See Also: Sell Tesla On Poor Gross Margin Guidance, Berenberg Warns
Hull added that competition from Porsche and Audi's entries into the pure-battery luxury car segment could be an added pressure point. Tesla's margins were also compared graphically to Mercedes and BMW: The Model S, X and 3 are all projected to be worse than these two peers by 2020.
While lower battery costs as Tesla scales its operations and a strong U.S. dollar should help profitability, Hull said the ending of Tesla's U.S. federal tax credit of $7,500 per car by 2019 and sustained low oil prices are headwinds.
Want Private Access to Benzinga Analyst?
Check out the latest strategies our team of experts are using every week so that you can always adapt to the market like the pros!—Get FULL Access to This Week's Webinar Here.
Hull also showed what margins would look like without government-inflated customer incentives.
Of note, the analyst said there were four key risks that could make selling Tesla a bad decision:
1. An extension of the U.S. federal tax credit would keep economics more favorable.
2. Tesla could give Model 3 guidance that explains why the car's cost structure allows it to be more profitable than analysts expect.
3. A weaker dollar would be positive.
4. A higher oil price would be positive for the Model 3.
Tesla shares traded near $170 on Wednesday morning, up from the $150 area it held before earnings but down from the $200 level it traded near a year ago.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.