Tesla Earnings Preview

The surprise cut in price just a couple of weeks ago is supposed to invigorate sales, but will it invigorate the share price?

Trying To Get Them Out The Door

For a long time, Tesla's main problem was matching demand. With wait lists stretching over two years, the main focus for analysts was on deliveries. But then came the ramp-up of the factory in Shanghai, followed by a slump in demand in China as the country faced the economic consequences of harsh lockdowns. The gigafactory in Berlin has been ramping up capacity in the last few months and is expected to continue to increase production. Then there were reputational issues with the CEO buying up Twitter too much controversy.

That Tesla cut prices at the start of the year is a sign that the supply and demand dynamics for the company have changed. Immediately after the cut, analysts rushed to reduce their price targets for the stock. The company's intention is logically to get a bigger market share - or defend its current share in the wake of increasing EV options from most major automobile manufacturers. But that's a presumed long-term return based on a short-term loss in profitability.

What To Look Out For

Since the price cut happened after the end of the quarter, it's unlikely to impact the earnings. But investors will be very keen to see if there is any change to the company's guidance. The estimate among analysts is that Tesla will be able to sell around $1.9B in vehicles this year, so any forecasts below that could further hurt the stock.

On the other hand, a forecast above it could provide a bit of a bounce. Assuming the outlook remains credible after Tesla forecasted 50% sales growth but only delivered 40% last year. Of course, last year also had the impact of diminished sales in China, which has become the company's largest market. The consensus is that earnings will increase to $1.15/shr on improved sales of $24.7B.

Tesla Trend Slowing Down

Tesla's share price has recovered more than 40% since the low shy of the $100 round support. But below the lower channel trendline, the outlook remains tilted to the downside as the trend stays in acceleration. $150 seems to be where prices and the bottom trendline meet, with a break within opening the door to $180 and $200. If bulls receive a rejection, losing triple digits could see the share price plummeting to $65.

Key Takeaways

Tesla has been facing demand and delivery issues but started ramping up production. Their recent price cut presumes a long-term return based on a short-term loss in profitability, but it is unlikely to impact these earnings. However, investors will be interested to see if Tesla's guidance changes due to the recent price cut. Analysts estimate that Tesla will sell around $1.9B in vehicles this year, so any forecast below that could hurt the stock. Diminished sales in China impacted last year's sales, but the consensus is that earnings will increase to $1.15/shr on improved sales of $24.7B this year.