All Eyes on Tesla as Earnings Season Kicks Into High Gear

• Investors' attention will be primarily focused on tech earnings for the next couple of weeks
• Of course, Tesla's is one of them, with the company due to report today after the U.S. session
• If earnings beat forecasts and the company gives positive guidance, the EV giant should easily retrieve the $200 level

Yesterday Microsoft (NASDAQ:MSFT) reported slower-than-expected revenue, pointing to a bleak outlook for the rest of the year. Today, it's Tesla's (NASDAQ:TSLA) turn, and the current market consensus is for earnings per share of $1.11 on revenues of $24.32 billion.

Should these predictions come true, it would represent an increase over the previous quarter in terms of earnings per share ($1.05) and revenue ($21.45 billion).

Tesla Earnings Estimate

Source: InvestingPro

Tesla Cuts Car Prices

One of the key strategic moves recently was the decision to cut car prices by about 20% in its main markets like Europe, the U.S., and China. As a result, sales have increased significantly, with good chances of continuing the positive trend this year. Thanks to the price cut, models priced up to $55,000 can catch a tax credit of up to $7,500. 

At the beginning of the year, the company reported on sales for 2022, which amounted to 1.37 million cars, of which 1.31 million were delivered to customers. All indications are that in 2023 this number will increase due to price cuts, volumes positively influenced by the expansion of factories in China, and the country's move to remove COVID restrictions. As the Chinese new year ends, production should get into full swing.

Chinese Competition

In 2022, Tesla maintained its supremacy in electric car production, but now, a serious competitor has emerged. The Chinese brand BYD (OTC:BYDDY) has seen a significant increase in production, selling 911,410 cars in 2022 and getting closer to Tesla than ever. The Chinese competitor's additional advantage is that its cars are significantly cheaper, with prices ranging from $14,490-$29,000.

But, China's move to remove COVID restrictions will favor BYD because it is an all-Chinese brand. Therefore, it will not be a surprise if BYD overtakes the American EV maker in the number of cars produced in the next few years. This could also translate into a decline in market share in China, where Tesla is in 3rd place behind BYD Motor and SAIC-GM-Wuling.

Technical View

Last year was the worst on record for Tesla from a stock market valuation perspective. After the previous downtrend, the stock price fell from around $400 at the beginning of 2022 to just over $101 per share in early January.

The beginning of 2023, however, was marked by a rebound thanks to expectations that the Fed will slow the pace of interest rate hikes. After breaking out of the downtrend line, the bulls will look to challenge the local resistance near $170 per share as the first target.

Tesla Daily Chart

If earnings beat forecasts and the company gives positive guidance for next quarter's results, the stock price could have the momentum it needs to break out of that resistance level and target $200.

Disclosure: The author doesn't own any of the securities mentioned.