Tesla Q4 Earnings Preview

Tesla's biggest problem has always been ramping up production enough to meet the high demand, but can it expand deliveries in a world of supply chain problems?

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Tesla shares have had a disappointing run so far this year. Its stock price hasn't broken the lows of last December, and its performance is in line with the broader market (it has tracked the Nasdaq's move into correction territory). Much of that can be attributed to circumstances outside of Tesla's fundamentals.

So far in 2022, the driving force for the TSLA stock price has likely been Fed's rapid move to tighten monetary policy. This is expected to increase capital costs and has put pressure on high-valuation tech stocks across the board.

Following last quarter's delivery numbers, Piper Sandler acknowledged that Tesla's fundamentals were better than expected. The firm’s analysts boosted estimates for deliveries but declined to raise the price target of $1300. That could be explained by increased capital costs from monetary policy putting downward pressure on tech stocks. So, even if Tesla's earnings top expectations, it doesn't mean its stock price will move higher in response, or if it does – the move could be short-lived.

Tesla vehicle deliveries

The market focus for Tesla is likely to be the usual: deliveries. This year, the company is slated to bring two new factories online, which would virtually double the existing delivery capacity. On Friday, reports circulated that the company might be able to start delivering models from its new Texas factory by the end of the year. If that rumour gets confirmed in the company's earnings report or subsequent investors call, that could support the stock.

The other metric to keep a close eye on is EBITDA, an important measure of how profitable the EV car company’s operations are, and its stock valuation. Last quarter, Tesla almost doubled its EBITDA, and it would be hard to repeat the feat twice in a row. Also, given the fall in the price of bitcoin lately, the company might even declare an extraordinary impairment that could impact their EPS.

Note that the average of the analysts surveyed by MarketWatch expects Tesla to report a fourth-quarter EPS of $2.26

Where next for TSLA?

Having plummeted nearly 25% since last November's all-time high, the Tesla share price continues to face downside risks. A key level of support lies at the $900 low registered last December. This is the bottom of what would be a sideways range with the top of the range back up at the record highs near $1,210-1,240. Below $900, prices may succumb to the 200 day moving average at $810 or previous resistance from the April 21 peak at $780 should selling pressure recommence.

Source: Spreadex Trading Platform

Key takeaways


Despite the Tesla stock continuing to slide, the earnings report might offer a sigh of relief even in the short-term as analysts expect better deliveries and margins. The chance of that happening will depend on how hawkish the Fed appears on Wednesday, on top of the company's ability to produce cars as demand grows.