Tesla Q4 Earnings Preview: Can The Good News Keep Coming?

Tesla Inc TSLA has already confirmed its third consecutive deliveries record with 112,000 units in the fourth quarter. On Wednesday afternoon, it will release additional details of its fiscal fourth-quarter results.

What The Street Expects From Tesla's Q4

Analysts anticipate earnings per share of about $1.62 on revenue of about $6.047 billion. Options traders forecast an 11.8% swing in share price — positive or negative — following the release. Notably, some of Tesla’s most entrenched bears bet on the positive.

“We believe that results and outlook must be strong to support the recent rally... and we expect them to be,” Morgan Stanley's Adam Jonas wrote in a note this week. He forecasts a sequential decline in auto gross margins from 20.8% to 19.7%.

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What The Street Projects For Tesla

“[U]ntil recently, manufacturing and product quality has been a drag rather than an asset, because Tesla lacked the economies of scale and experience in large-scale production,” said UBS analyst Patrick Hummel, according to Yahoo Finance. “However, the company likely has passed an inflection point, i.e., manufacturing has now become an asset because Tesla is now better and more efficient in producing its EVs (electric vehicles) than anybody else.”

Morgan Stanley expects full-year deliveries to rise 36% in 2020, with guidance between 500,000 and 550,000 units. It deems local production in Europe critical to sales volume and the timing of Model Y productions critical to profit forecasting.

“We expect cost improvements at Fremont and the ramp in China to drive Tesla’s first full year of GAAP profitability in the company’s history – an important milestone for the global EV market,” Jonas wrote.

Until the China plant is fully ramped, Tesla can lean on its service revenue, over-the-air update revenue, and provision timing, according to Morgan Staney. The analysts project 2020 free cash flow of $1 billion with $2.4 billion in capital expenditures.

Tesla's stock closed Tuesday's session at $566.90 per share.