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Tesla Q1 Earnings Preview: Investors Will Seek Reason For Stock's 100% Jump

Published 04/29/2020, 11:57 AM
Updated 09/02/2020, 02:05 AM
  • Reports Q1 2020 results on Wednesday, April 29, after the market closes
  • Revenue Expectation: $6.03 billion
  • EPS Expectation: $-1.08

The time has finally come when the market will find out whether this year's powerful rally in Tesla (NASDAQ:TSLA) shares is actually justified. Defying all odds amid the COVID-19 pandemic, the electric carmaker's stock has shown strong resilience in 2020, rewarding investors who believe in CEO Elon Musk’s ambitious growth plans.

TSLA Weekly TTM

Powered by this strong bullish sentiment, Tesla stock has gained more than 80% this year and more than doubled since the March 18 close. That rebound has put Tesla in the elite group of mega cap technology stocks, such as Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX), that emerged unscathed from the steepest market slide on record. The stock fell more than 3% yesterday to finish the session at $769.12.

But in order to support the overall momentum, Tesla needs to produce a blowout quarter, beating analysts’ expectations.

In a recent note, Barclays said that it expects Tesla to keep its full-year delivery guidance of 500,000 vehicles the same when it releases its earnings today, despite plant closures due to the pandemic. The company’s Fremont, California production line won’t remain closed for long, Barclays projected. Tesla paused production at the plant in late March after government officials said it was not an essential business.

Significant Lead Over Competitors

Recently, Goldman Sachs also recommended buying Tesla. Their note targeted a high of $864. Goldman analyst Mark Delaney wrote that in his view, Tesla has a significant lead over other automakers in making electric cars and is expected to maintain a strong market position.

Tesla's strong brand, vertical integration and early-mover advantage are critical factors boosting the company, which operates in an industry with generally long development cycles—it takes about two to four years on average to roll out new models.

Competitors, on the other hand, are struggling to survive in this tough economic environment. Ford (NYSE:F) has already suspended its dividend. And last month it drew $15.4 billion from two credit lines, to help the company weather months of uncertainty over when it can resume manufacturing and selling vehicles. The Detroit automaker may now stockpile even more cash to get through the crisis, according to a report in Bloomberg.

Investors became more confident about Tesla this month, after the carmaker released a better-than-expected sales report for Q1, raising expectations that the company was in a stronger position to withstand the coronavirus-triggered slowdown.

Tesla delivered 88,400 vehicles worldwide in the first quarter, down 21% from the last three months of 2019. But the total was still better than analysts’ average estimate for about 78,100.

Still, Caution Is Warranted

But the reason bulls rallied behind Tesla this year is worth noting: sentiment on the stock was buoyed when founder and CEO Musk—after years of over-promising and under-delivering—finally proved true to his word. The company beat analyst revenue estimates for Q4 and accelerated the introduction of the new Model Y crossover.

As well, the completion of its Shanghai factory and the company's success at exceeding its ambitious goal of selling 360,000 vehicles for the year also offered a powerful signal that Tesla could rapidly become a meaningful industry player if it continues to meet its targets.

Needham analyst Rajvindra Gill believes it would be better to remain cautious on Tesla as demand for cars has largely collapsed in North America and Europe. In a note last month Gill said:

“In the long-term, we continue to expect margin pressure from declining sales of higher-margin Model S & X vehicles, a lower mix within Model 3, and competitive pressures from other automakers as they launch their electric vehicles over the next few years.”

Bottom Line

Tesla’s ongoing momentum certainly shows that the company is in a much better position to weather the current economic slump than other carmakers. The company’s first quarter earnings report today should show whether the current optimism is backed by fundamentals.

Latest comments

I have to put money on Monday what I must do
I predicted positive this earnings this quater and almost fell off my chair in excitement looking at the aftermarket, im sad the price couldnt hold up today but hoping for bigger gains in the future. Especially in about 3 weeks when they announce their progress eith battery innovations, hoping its going to push the stock sky high.
I don't understand tesla is a car maker. Many people will not buy any new car because of no jobs and the gas is too cheap how is it possible the tesla stock rise up?
Tesla can’t sustain this rally !
How US stocks are rallying when there are 25 million without jobs, over 1 million infected, more than 50 thousand dead, businnesses are shut down with no revenues, Fed is bailing out and injection of 2 trillion dollars in economy, oil at historic low, food crisis, this qtr seems over but coming qtr is highly negative in EPS and pandemic still ongoing with no control or myths on vaccine development in market ? I am absolutely clueless on this as who has this money to keep stocks buoyant. Is it feds 2 trillions or chinese ?
everyone needs to remember the buy in for emission trades as well and we are talking in the billions of dollars TSLA is enjoying
If FED not buy directly stocks then has authorised some firms to do it , with the agreement never to lose their money ofcourse.
Tesla defies logic and fundamentals
it's also called speculation
Its called a fraud
On point. Exactly.
Tesla is a bubble that will burst sooner or later! It is high risk and any mkney manager shouldLose thier job for buying it
Pointless article
they could sell 2 cars and this stock will moon. no one really cares.
investors are not seeking reason anymore. They are just buying.
To many noobs buying social media trending stocks
Okay
Tesla is leading the entire industry in self driving and other software innovation, not to mention they are five years ahead of everyone in battery and EV in general.
China has been trying to steal tesla’s IP like crazy! Cant compete with their tech
What facts do you have to back that up. This is just more and more meaningless unfounded FUD
tesla is a leading automobile b to b solutions manager within a sustainable market leading macro space ...so the stock should move higher...
Lol reason?
Well, look at the hints provided by Volvo, for example. They just announced they would be concentrating on electromobility. That's quite a strong hint electromobility still has a good future.
 but non of them having Tesla's reputation in electric car's field.
buy the hype sell the news. no one will be buying cars in the next few months. thats why every dealer is offering o% interest. all teslas are over 50 k wont buy that over paying bills or mortgage
I will be buying 100k worth of calls at 355pm
target price??
I would be selling today. Look at the chart above. It's in a massive resistance zone. Look at the IRBs in the backdrop. It's also done a 5 way move really fast. Think rocket fuel and does it have enough fuel to blast through that massive IRB resistance zone. I don't think so. 500 to 550 is where it's headed with a possible triangle setting up.
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