Riding Shotgun (TSLA Earnings 5/3/17)

Tesla (TSLA) will report first quarter results in a shareholder letter on its website after the bell and host a call at 17:30. 

• Tesla preannounced Q1 deliveries up 69% to 25K on April 2. The EV mix was 13450 Model S and 11550 Model X. 
• Tesla had guided for 47-50K Model S and X deliveries in the first half of the year, now implying 22-25K deliveries for Q2, which will be updated this afternoon. 
• Investors were used to Tesla missing delivery targets because of production constraints, as they had four of the last five quarters, so the strong Q1 deliveries caused the stock to break out to fresh all-time highs. 
• Tesla is expected to report Q1 non-GAAP EPS of ($0.78) vs. ($0.57) last year with revenue up 63% to $2.61 bln. 
• Tesla will unveil the final version of the Model 3 in July. 
• Tesla raised $1.2 bln in stock and convertible notes in March. That was the third capital raise for Tesla since August of 2015... and it probably won't be the last. Tesla is still far from generating cash or profits on its own, but investors are more focused on the big picture opportunity. 

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We've been all over TSLA and I continue to remain bullish so (with house money) so long last this interesting trader (pictured below) does too. TSLA broke out of a 3 year range and our target remains very north of here; especially with the 26% short interest.

Tesla's market cap is ~$51 bln; 26% of the float is sold short.

Micro Machine (MU)

MU is expected to report earnings tonight after the close. There is a conference call scheduled for 4:30PM. 

Q2 Capital IQ consensus calls for EPS of $0.86 (versus ($0.05) last year) on revenue of $4.651 bln (+58.5% YoY). 

• The current consensus is within the company's guidance range of $4.6-4.7 billion. 
• Micron's EPS guidance is at $0.86 +/- a few cents. The company raised its EPS guidance at a Morgan Stanley conference on March 2nd, and raised the midpoint of its revenue guidance.
• 2015 and early 2016 proved to be a tumultuous year as a slowdown in demand, driven largely by the decline of the PC industry (Now less than 20% of MUs business), impacted the company as it was restructuring. 
• Comments from MU surrounding demand in the company's newly targeted areas of server, mobile, automotive, and Industrial machine-to-machine areas bode well as does the pricing improvements seen industry wide.

DRAM and Margins

• MU says it currently expects 2017 DRAM bit supply growth in the 15% to 20% range. Its long-term bit demand growth forecast of ~20% to 25%. 
• The company's overall consolidated GAAP gross margin of 25 percent for the first quarter of fiscal 2017 was 7 percentage points higher compared to the fourth quarter of fiscal 2016 primarily due to manufacturing cost reductions and increases in DRAM average selling prices. 
• Margin Guidance: Looking ahead to the second quarter, the company sees Q2 gross Margin in the range of 37-38%. CO's margins guidance was raised at the Morgan Stanley conference on March 2. 

Options Activity

Based on MU options, the current implied volatility stands at ~ 46%, which is 64% higher than historical volatility (over the past 30 days).The options market is currently pricing in a move of ~7% in either direction by weekly expiration (Friday).

Options activity has been aggressively bullish in the last few weeks with multiple strikes and calls bought. 

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MU Options Activity

Technicals:

MU shares have outperformed the S&P so far this year with MU raising by 19% vs 5% gain in the index.  Resistance sits near the $26.50-26.75 area, while support hangs near $25.75-26.00.

TRADE: Buy APR 29C AND/OR WDC APR 80C