Tesla skidded lower after its last earnings report on July 19, but now the EV giant could be turning a corner.

The first pattern on today’s chart is the dive toward $212 on August 18. It was the lowest level in more than two months, but TSLA gapped back to the upside a day later. The result is a potential “abandoned baby” candlestick.

Second …

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Travel stocks have climbed recently, and now Caesars Entertainment could be showing signs of strength.

The first pattern on today’s chart is the falling trendline along the highs of February, March and mid-June. The casino operator pushed above it at the end of the last quarter and returned there on Monday. Further upside from here could make traders think resistance is fading.

Bollinger Band width has also …

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Carnival is the top-performing member of the S&P 500 in June, and one big options trader may think it will keep sailing over the summer.

Check out this unusual options activity yesterday in the cruise-ship operator:

• 20,000 August 16 calls traded for $0.83.
• 20,000 August 20 calls traded for $0.14.
• Volume exceeded open interest in both strikes, which suggests new positions were opened.

The transaction appears to be a vertical call spread, which can profit from a rally with limited cost. Buying calls fixes the price where investors can purchase a security. They can also be sold to generate premium and lower the cost.

Tuesday’s spread would have cost $0.69. It could expand to $4 if CCL closes at or above $20 on expiration. That’s a potential return of 480 percent from a 31 percent move in the underlying shares. (They were quoted at $15.28 at the moment of the trade.)

CCL rose 8.8 percent to $15.88 yesterday and is up 41 percent so far this month. The travel stock lost about 90 percent of its value between early 2018 and early 2020. It hit a 30-year low in October, and has worked steadily higher since on signs of travel demand improving.

The shares jumped to a new 52-week high on June 12 thanks to an upgrade by JPMorgan. The company also reported better-than-expected earnings and revenue on Monday.

Overall option volume was slightly above average in the stock yesterday, according to TradeStation data. Calls accounted for a bullish 75 percent of the total.

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Carnival has been stuck in the doldrums since last summer, but now some traders may think it’s ready to cruise higher.

The first pattern on today’s chart is Friday’s last price of $12.18. While the level was slightly below February’s peak, it was the highest weekly close in a year. That could make traders expect a breakout if CCL manages to inch further upward.

Second, there could be …

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Amazon.com may be showing signs of weakness after another post-earnings drop.

The first pattern on today’s chart is the rising trendline along the lows of March and April. AMZN fell to that support last week after issuing so-so guidance and has remained there since. That could make some traders expect follow-through to the downside.

Next, the e-commerce giant …

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Tesla more than doubled between January and mid-February. It retraced almost half that move last month and is now trying to bounce. Will the move continue?

The first pattern on today’s chart is the 50-day moving average, which the electric-car maker tested and held at the start of last week. The 50-day MA is also rising for the first time since last summer. That may suggest…

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Tesla is one of the market’s most active companies for stock and options traders. It could also look most expensive by various measures, but is it overvalued?

This article will address the question by comparing Elon Musk’s company with other major car makers. It will use common financial ratios and real-world numbers so you can make your own decision about Tesla shares.

Tesla Valuation: Market Cap

Tesla is the most valuable automaker by far. Its market capitalization (stock price times shares outstanding) of $623 billion ranks it sixth among companies on the U.S. stock market. The electric-car company is worth almost 11 times GM and over 12 times F.

However, TSLA has a much cleaner balance sheet because it carries less than $6 billion of debt. GM and F, in contrast, have over $110 billion of debt each. Market cap therefore understates the true financial size of GM and F.

This is where stock market investors often use “enterprise value” to judge the size of a company.

Enterprise Value = Market Cap + Debt - Cash

By this measure, TSLA is worth roughly 4 times General Motors and Ford Motor.

Tesla Valuation: Price / Earnings Ratio

The price / earnings ratio, or P/E, is one of the most common measures of valuation in the stock market. This is simply a company’s per-share earnings divided by its stock price. Using P/E ratio, Tesla is far more expensive than other car makers like GM and Ford.

Tesla trades for 54 times historic earnings, and 48 times estimated future earnings. That’s 6-7 times the corresponding multiples of its gasoline-powered rivals.

Price / sales, or price / revenue, is another valuation metric. Tesla trades for 8.4 times sales, which places it in the top 15 percent of companies in the S&P 500 index. GM and F, on the other hand, trade for less than 0.5 times revenue. By this measure, Tesla is worth over 17 times more.

Cash Flow Generation

Aside from earnings, analysts can also use cash flow to value Tesla shares. Cash flow adjusts net income to remove accrual accounting mechanisms and gains from investing activities. Analysts can also use cash flow to compare stock prices.

Tesla’s valuation is about 42 times cash flow by this measure. GM trades for less than 4 times cash flow and F trades for about 7 times.

Is Tesla Overpriced?

One major reason why Tesla is valued so much higher than its peers is growth. The electric-car maker increased its sales by 37 percent last year. Wall Street analysts anticipate another 26 percent of upside this year.

GM’s sales rose 28 percent last year, while F shrank by 17 percent. They’re both expected to grow less than 4 percent in 2023.

Tesla Valuation: Stores and Units

Investors can also use non-financial measures to compare Tesla with other car makers. How many cars does it sell? How many locations does it have to reach customers?

By this measure TSLA is also much more expensive than peers. It operates only 213 physical stores in the U.S. That’s about 1/19th of GM’s footprint and 1/14th of F’s reach.

TSLA overcomes part of this with a strong online sales model. However, it may create a potential risk over time. Traditional auto makers have much wider distribution and marketing networks across the country. This could let them get in front of a lot more customers very quickly once they start rolling out more electric models.

In conclusion, Tesla shares have high valuations based on measures like P/E ratio and price/sales. This mostly results from its strong growth versus traditional automakers like GM and F. Tesla fell more in 2022 but is now rebounding more sharply this year.

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Yum Brands had a strong rally in late 2022. Now after a pause, the restaurant company may interest pullback buyers.

The first pattern on today’s chart is $125.70, a daily closing high from last April. YUM hesitated below that level in November and then began the New Year by testing it. Prices are now holding the same zone again, which could suggest old resistance has become new support.

Second, the 50-day moving average …

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Royal Caribbean Cruises drifted higher since the summer, but now it may be rolling over.

The first pattern on today’s chart is the level around $61.45, where the leisure stock bottomed in March before proceeding to new lows. RCL peaked around that price on November 15 and December 1. (Both were also monthly highs.) That may suggest old support has become new resistance.

Second, the stock …

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Amazon.com has declined along with the broader Nasdaq-100. But other consumer-facing companies have fared much better.

The chart below compares AMZN with competing retailers. It uses percentage-change charts with a six-month interval. Notice how the e-commerce giant is the only stock with a negative performance.

Etsy Outperforms

Etsy (ETSY) is the biggest standout on the list with a 58 percent gain. It is managing to retain most customers added during the pandemic, CEO Josh Silverman told CNBC yesterday. He added that by having producers sell directly to buyers, ETSY avoids the supply-chain challenges and costs hitting most retailers.

That’s consistent with the last quarterly report on November 10: Bottom-line profits missed estimates, but the bulls focused on top-line sales growth and projected increases in gross-merchandise volumes.

Another part of the story could be the space for growth in coming quarters because ETSY’s revenue in the last year totaled just $2.5 billion. That’s less than 0.5 percent of AMZN’s total.

Ross Stores, Gap

Here are some others retail stocks that have managed to gain in the last six months as AMZN declined:

• Ross Stores (ROST) is up 45 percent in the period. It surged after earnings, revenue and guidance shot past expectations on November 17. Some analysts also see the discounter benefiting from lower freight costs and customer gains.
• Gap (GPS) has risen 37 percent in the last six months. Unexpected growth in same-store sales and lower inventories helped drive a strong quarterly report on November 17.
• TJX (TJX) and Ralph Lauren (RL) also gained on strong results.

Takeaways?

So what are the key points?

First, AMZN is down at a time when rivals are up. That suggests not only customers are shifting to new retailers, but so are investors.

Second, the coronavirus pandemic clearly boosted AMZN’s e-commerce business. But it might have helped ETSY even more in the long run by jump-starting the smaller company’s market share.

Third, a “retail apocalypse” hammered traditional retailers before the pandemic. Tens of thousands of brick-and-mortar locations closed between 2015 and 2020, but now the industry is showing signs of a recovery. Companies have smaller footprints and less competition. They could also benefit from healthy consumer spending — especially if gasoline prices continue to fall.

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