Earnings Preview Tesla

  • Tesla to report earnings after Wall Street session today
  • Market expects earnings to more than double
  • More than 60% jump in revenue expected
  • Focus on supply chains and China
  • Stock trades 3% year-to-date lower

Tesla (TSLA.US), world’s most famous EV manufacturer, is set to report financial results for Q1 2022 today after the close of the Wall Street session. As the company is one of the biggest in terms of market capitalization and one of retail investors’ most favorite, earnings release is surely going to be a big event. Let’s take a brief look at what the market expects and what to focus on.

Strong earnings and sales growth expected

When it comes to headline results, the market expects another quarter of solid growth for Tesla. Revenue is expected to jump more than 60% compared to the first quarter of 2021. Key earnings metrics – EPS, Net Income, Operating Profit and EBITDA – are all expected to have more than doubled in Q1 2022 compared to Q2 2022.

  • Revenue: $17.9 billion expected vs $10.4 billion in Q1 2021
  • EPS: $2.27 expected vs $0.46 in Q1 2021
  • Net Income: $2.59 billion expected vs $0.44 billion in Q1 2021
  • Operating Profit: $2.59 billion expected vs $0.49 billion in Q1 2021
  • EBITDA: $4.06 billion expected vs $1.84 billion in Q1 2021

Chance for disappointment?

Market expectations for the upcoming quarterly earnings release from Tesla point to another quarter of strong year-over-year growth. However, a point to note is that those expectations have not really changed since Tesla released its quarterly deliveries data. Tesla managed to deliver 310 thousand vehicles in the January-March 2022 period, a small miss compared to analysts’ expectations. While the miss was small, expectations for Tesla’s financial metrics, like sales or earnings, failed to adjust to include this miss. This could mean that Tesla may not live up to market’s expectations and report results that are weaker than expected.

What to focus on?

It is not hard to answer the question on what to focus on in Tesla’s earnings – on the future of course! Investors and analysts will look into any hints on how current supply chain struggles and Chinese Covid restrictions are impacting the outlook for Tesla’s production. Deliveries and demand do not seem to be an issue, what is an issue is production of what needs to be delivered. Tesla’s factory in China was shut down at the end of March in order to comply with local lockdown regulations and has not been reopened since. As China is an important market for Tesla, both in terms of sales and production, future outlook on China could be a key to the company’s stock performance. Comments on security of key commodity supplies are also likely to be made.

One thing that most likely will not be mentioned or paid too much time to is Musk’s recent attempt to takeover Twitter. This investment was made by Musk and not Tesla therefore it would make much sense to mention it.

A look at the chart

Taking a look at Tesla chart (TSLA.US) at H4 interval, we can see that the stock pulled back after a failed test of the downward trendline (drawn through highs from early-November 2021 and early-January 2022). Stock launched a pull back but the downward correction was halted at the 38.2% retracement of the most recent upward impulse. In case the stock manages to make its way back above 23.6% retracement in the $1,045 area, another attempt of breaking above the aforementioned trendline may be launched. Tesla’s earnings releases usually turn out to be highly volatile events so traders can expect big moves in the after-hours trading today.

Source: xStation5

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