Tesla Inc. (TSLA) is facing mounting challenges with recent declines in deliveries and revenue signaling weakening demand in key markets. Despite strong profitability and growth metrics, TSLA’s sky-high valuation presents substantial downside risk. Coupled with stiff competition from Chinese EV makers eroding market share and market timing indicating a potential reversal, this creates an attractive opportunity for adding bearish exposure. Trade timing The timing for adding bearish exposure to TSLA is optimal, as the stock has recently rallied to its $300 resistance level, forming a double-top pattern. This technical set-up, combined with overbought conditions, suggests a potential reversal lower, with a downside target near $220, offering an attractive risk-to-reward profile for a bearish trade. TSLA trades at a substantial premium to its industry because of industry leading growth and profitability metrics, but it presents significant downside risks due to significant overvaluation and declining performance. Forward PE Ratio: 144x vs. Industry Average 11x Net Margin: 7% vs. Industry Average 3% Expected EPS Growth: 17% vs. Industry Average 10% Expected Revenue Growth: 13% vs. Industry Average 3% Bearish thesis Weakening Demand : Tesla’s Q1 2025 deliveries fell 13% YoY to 336,681 vehicles, with a 37% YoY sales drop in Europe and a 15% YoY decline in the US, reflecting weak demand exacerbated by a brand crisis linked to CEO Elon Musk’s political activities. Competitive Pressure : Stiff competition from Chinese EV makers is eroding Tesla’s market share, which fell from 17.9% to 9.3% in Europe in Q1 2025, while high inventory levels signal oversupply amid declining demand. Options trade To capitalize on TSLA’s potential downside, I’m selling a June 20, 2025 $275/$225 Put Vertical @ $16.63 Debit. This entails: Buying the June $275 put @ $22.63 Selling the June $225 put @ $6.00 The maximum reward is $3337 if TSLA is above $275 at expiration. The maximum risk is $1663 if TSLA is below $225 at expiration. The breakeven point for this trade is $258.37. View this Trade with Updated Prices at OptionsPlay This strategy positions you to benefit from TSLA’s potential downside, leveraging its technical reversal, valuation, and competitive pressures to profit from selling premium with defined risk. With Tesla facing structural challenges in demand and market share, this put vertical offers a compelling opportunity to capitalize on a high-premium name DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
