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Tesla Q4 Earnings Preview: Broad Risk-Aversion May Eclipse Company's Strength

By Investing.com (Haris Anwar/Investing.com)Stock MarketsJan 26, 2022 09:34AM ET
www.investing.com/analysis/tesla-q4-earnings-preview-broad-riskaversion-may-eclipse-companys-strength-200615926
Tesla Q4 Earnings Preview: Broad Risk-Aversion May Eclipse Company's Strength
By Investing.com (Haris Anwar/Investing.com)   |  Jan 26, 2022 09:34AM ET
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  • Reports Q4 2021 results on Wednesday, Jan. 26, after the market close
  • Revenue Expectation: $16.88 billion
  • EPS Expectation: $2.25

This quarter, electric vehicle maker Tesla's (NASDAQ:TSLA) earnings performance could end up taking a back seat as its hefty market cap comes into focus. As the macro market setting turns to risk-aversion, unsustainable valuations are becoming increasingly dangerous.

Since the pandemic hit, the world's largest EV manufacturer has been a remarkable growth story. Until early November of the past year, shares of the Austin, Texas-based manufacturer surged more than 1,000% over the preceding two-year period.

But the threat of higher interest rates, coupled with CEO Elon Musk's sale of his shares in the company, hit Tesla hard, wiping out about 25% of the stock's gains since the Nov. 4 record high of $1,229.91.

Tesla Weekly Chart
Tesla Weekly Chart

Tesla reported earlier this month that its annual vehicle deliveries surged 87% in 2021, even when the auto industry is facing severe shortages of semiconductors and other parts due to supply-chain disruptions.

The electric carmaker also produced roughly 930,000 vehicles in 2021. More than half of those likely were made in Shanghai, Credit Suisse estimated recently.

While reiterating Tesla as "overweight" this month, Morgan Stanley said that it doesn't see anyone who can challenge its volume. Tesla is expanding on three continents and is nearing the completion of new factories in Austin, Texas, and Berlin.

High-Performance Bar

Despite this favorable outlook, Tesla's ability to overcome supply-chain bottlenecks that stymied other manufacturers has its limits, too, in our view. And that's perhaps the main reason most analysts don't expect a spike in TSLA shares in the short run.

Zachary Kirkhorn, the company's chief financial officer, told investors in October:

"[We are] trying as far as we can to maximize that capacity to meet the growing demand for vehicles that run on clean energy. The net, net of all this is that we're not able to increase production capacity fast enough."

According to InvestingPro analysis, Tesla stock is trading at a 12-month price-to-earnings multiple of 279, a level that has set the performance bar so high that there is no space for the carmaker to make any errors when it comes to financial performance.

Due to this extremely rich valuation, Tesla's stock could be a risky bet based on InvestingPro's model, which assigns Tesla a $735.60 share fair value—an almost 21% downside risk from the current level.

Tesla Fair Value Estimate
Tesla Fair Value Estimate

Source: InvestingPro

Analysts' consensus estimate for Tesla stock provides a similar picture. In an Investing.com poll of 37 analysts, 16 rate the stock as a buy, 11 consider it a sell, and the rest are neutral.

Tesla Consensus Estimates
Tesla Consensus Estimates

Chart: Investing.com

Bottom Line

Tesla is likely to produce yet another strong quarter after the company smashed its car delivery target in the final quarter of the past year. But continuing supply-chain constraints and concerns about the stock's sky-high valuation may keep investors on the sidelines—especially when growth stocks in general are going through a major correction.

Tesla Q4 Earnings Preview: Broad Risk-Aversion May Eclipse Company's Strength
 

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Tesla Q4 Earnings Preview: Broad Risk-Aversion May Eclipse Company's Strength

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Comments (3)
Jerome NY
Jeff_Musk Jan 28, 2022 1:53AM ET
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EPS 6-10 per year. Fare value 120-200 for y2021 haha
Chris Hall
Chris Hall Jan 26, 2022 3:01AM ET
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buy at 200... and still overvalued
Mike Terrones
Mike Terrones Jan 26, 2022 3:01AM ET
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are you high?
chris strong
chris strong Jan 26, 2022 3:01AM ET
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Buy when the chart tells you its time
John Lee
John Lee Jan 26, 2022 2:29AM ET
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So Harris what is your suggested price if we were to invest in tesla? And when can we buy ?
Fabrizio Fusaro
Fabrizio Fusaro Jan 26, 2022 2:29AM ET
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400
Ron Love
Ron Love Jan 26, 2022 2:29AM ET
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Don’t ask him he’s been a bear since $180 pre-split.
Cristiano Coelho
Cristiano Coelho Jan 26, 2022 2:29AM ET
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you guys never putted your money on Tesla, for sure. every year I hear the same : Tesla is over valuated etc etc, then Tesla breaks another record , get in the train when the dip allows
Hulio Corn
Hulio Corn Jan 26, 2022 2:29AM ET
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Cristiano Coelho  kann sein, ist trozdem nicht mehr als ~100$ Wert, aber kann ja jeder anders sehen
sean patel
sean patel Jan 26, 2022 2:29AM ET
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Tesla will touch the 1400 mark
 
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