Tesla Rejoins Top 10 US Stocks: What Should Investors Watch?

Despite a rough start to the year with significant losses, Tesla shares are now up 5.6% year-to-date, though this is the weakest performance among the "Magnificent Seven" tech stocks. The company's market capitalization has increased by about $250 billion during the winning streak, re-establishing its position among the top 10 largest stocks in the United States.

In early June of the previous year, Tesla achieved an unprecedented milestone, marking a streak of 13 consecutive trading days with record-breaking increases. This impressive surge significantly boosted Tesla's market capitalization by over $200 billion. It has been noted in our prior coverage that July often acts as a "lucky month" for Tesla: Over the nine years since 2015, the stock price of the company has witnessed an increase six times during the month of July.

1. Financial Results for Q2 2024: Following the disclosure of second-quarter delivery data, Tesla is slated to release its latest earnings report after the market closes on July 23rd. Bloomberg's consensus forecast anticipates Tesla's Q2 EPS Adj. to be $0.586, representing a year-over-year decline of 36%.

2. Robotaxi Event: Tesla's Robotaxi event, scheduled for August 8th, promises to unveil strategies for monetizing autonomous vehicles. This event could potentially act as another boost for Tesla's share value and reaffirm the company's crucial position and growth potential within the AI sector.

As Tesla's stock price rapidly rebounds, its valuation continues to rise. At its 52-week low, Tesla stock traded at approximately 49 times the per-share earnings forecast for the next 12 months, according to FactSet data. Presently, the price is 99 times higher than its anticipated profit per share over the coming year. This represents a doubling of its price-to-earnings (P/E) ratio just within three months and signifies the highest P/E ratio since April 2022 and suggesting that Tesla must significantly increase its long-term earnings to rationalize such a high valuation.

Tobe sure,the earnings estimates are expected to improve, but the pace of this recovery remains to be seen in the future. Brian Rauscher, founder of BFR Research, notes that the rate at which Wall Street has been cutting Tesla's earnings estimates is decelerating, which could be interpreted as a positive sign.

Furthermore, investors should remaincautious as Tesla's stock has shown a ten-day winning streak, pushing its Relative Strength Index (RSI) to 87, indicating an overbought condition. Analysts believe that a substantial memesentiment underpins this latest surge in Tesla's stock price. Historical trends since 2019 suggest that each time the RSI reached similar levels, the stock price typically marked a "local peak."

In the context of a rising market, investors have a variety of strategies at their disposal. Beyond simply holding shares, utilizing options strategies can be an equally effective approach. Jeff Kilburg, founder & CEO of KKM Financial, has previously recommended that investors adopt the "Bull Call Spread" options strategy to increase their bullish exposure while minimizing the risk to their principal. For instance, let's consider a trade executed by Kilburg five days ago:

• Buying a Call Option: Buy the $245 Call with a 7/26/2024 expiry for $16.50, granting them the right to purchase Tesla stock at $245 per share before the expiry date.

• Selling a Call Option: Concurrently, sell a higher strike call option, specifically Sell the $265 Call with a 7/26/2024 expiry for $9.75. This obligates the investor to sell Tesla stock at $265 per share to the buyer of the option, should the stock price exceed this amount.