Tesla Near 52-Week Lows Ahead of Earnings

Following disappointing delivery figures, investors are preparing for Tesla's likely negative Q1 trading update. However, the company has already implemented several initiatives aimed at improving performance.

Share Price Down 40% YTD

Tesla's share price has fallen over 40% year-to-date (YTD), representing a significant reversal from its previous narrative as one of the Magnificent Seven stocks of 2023. Investor enthusiasm has waned as the electric vehicle (EV) market has cooled, and Tesla has struggled to maintain market share. The latest share price drop followed Tesla's first deliveries decrease since the COVID-19 pandemic began. Analysts were particularly concerned about weak sales after Tesla cut prices in an effort to boost demand.

Tesla attributed its delivery drop to reduced production at its Freemont plant for upgrades to increase Model 3 output and a shutdown at its Berlin factory due to supply chain issues. However, Tesla produced 46,000 more vehicles than it sold, suggesting underlying demand challenges. In response to disappointing results, Tesla ended the inventory discounts but introduced price cuts to Model Y.

Opportunity for a Turnaround?

Earlier this month, Tesla announced restructuring initiatives, including a 10% workforce reduction and executive changes. Analysts expect the upcoming earnings report to show a 45.9% decline year-on-year (YOY) to $0.46 and a 2.6% sales drop from $22.7 billion in the first quarter of 2023. The company is expected to post Q1 results on Tuesday after the market closes.

Attention will focus on Tesla's guidance and any plans to regain momentum. Discounts over the past year have impacted margins, while cheaper Chinese EVs increased competition. There is speculation that Tesla may delay its $25,000 Model e to prioritise higher-margin products and services like its Full Self-Driving (FSD) system and robotaxi ambitions. With the share price near 52-week lows, the company will seek to reassure investors on margin recovery plans.​

TSLA Just Ended Wedge Pattern

In recent trading, Tesla's share price has breached its lower wedge trendline, forming an unconfirmed breakout. Should the stock close below $150 for more than three sessions, the downward movement could potentially extend to $125 and even the $100 handle next. Conversely, reclaiming $160 may boost bullish sentiment and set the stage for a test of $175. However, only a decisive break above $195 and, ultimately, the $200 mark will meaningfully increase the likelihood of a genuine trend reversal.​

Source: SpreadEx / TESLA

Key Takeaways

Following disappointing delivery figures and a 40% decline in its share price since the start of the year, investors are preparing for Tesla's likely negative Q1 trading update to be released this week. While Tesla attributed its deliveries drop to factory shutdowns and price cuts aimed at boosting demand, analysts expect a decline in sales and earnings. Attention will focus on the company's guidance and plans to regain momentum amid increased competition, as it seeks to reassure investors on margin recovery while prioritising higher-margin products and services. With its share price near 52-week lows, the upcoming results will be crucial for reversing the recent downward trend.​