Tesla Q1 Earnings Preview: What Investors Should Know Heading Into Today's Print

Zinger Key Points
  • Tesla is widely expected to comfortably beat first-quarter consensus when it reports Wednesday after the close
  • CEO Musk may have to field several questions on topics ranging from the Giga Shanghai shutdown to his interest in Twitter

Tesla, Inc. TSLA is in the spotlight on Wednesday, as the electric vehicle manufacturer prepares to release its first-quarter financial scorecard.

Following the earnings report, Tesla management, led by CEO Elon Musk, is scheduled to hold a Q&A session at 5:30 p.m. ET.

Expectations By Numbers: Tesla is likely to report a 71% year-over-year increase in fourth-quarter revenues and marginal quarter-over-quarter growth. The consensus expectation, compiled by Benzinga Pro, suggests the company may more than double its bottom line from a year ago.

Tesla reported record deliveries of 310,048 cars for the first quarter. Assuming the average selling price of the cars stayed at fourth-quarter levels of $50,820, automotive revenue, excluding regulatory credits, may come in around $15.8 billion. To this, regulatory credits and other revenues will add on to arrive at total revenues.

Future Fund's Gary Black gave a bullish EPS forecast of $2.50, citing better-than-expected gross margin stemming from a better mix of Model 3 LR and Model Y Performance variants in the U.S.

Credit Suisse analyst Dan Levy's EPS estimate is at $2.56.

Other Key Metrics:

Regulatory credits: These credits rose to $314 million in the fourth quarter from the third quarter's $279 million. Tesla is often criticized for the margin boost the credits give, as it can sell those credits to other automakers and realize almost the entire amount as profits.

Automotive Margins: This metric has been on an expanding trajectory, but is expected to have come under pressure this quarter.

"Margins remain a key focus amid cost inflation – any commentary on risk to margins could be a negative for the stock," Credit Suisse's Levy said in a recent note.

The analyst expects gross margin, excluding credits, to come in at 26.6%, dragged by cost inflation and production inefficiencies.

Related Link: Elon Musk Has These 3 Options Following Twitter's Poison Pill; 'It Now Becomes A Game of High Stakes Poker'

Focus Items On Earnings Call: The three-week shutdown of Tesla's Giga Shanghai has worried investors to no end, given its importance as an export base and its salubrious impact on margin. Production has started on a small scale and is expected to ramp up over the coming days.

"The main question for tomorrow is just how bad the China production issues are and what that means for deliveries in 2Q and the rest of the year," prominent Tesla bull and Wedbush analyst Daniel Ives said.

The analyst estimates that roughly 50,000 units may have been lost due to the three-week factory closure. How Tesla can ramp up production could influence the production impact going forward, he added. Credit Suisse expects a 90,000 shortfall in second-quarter deliveries.

Amid the production disruptions, it remains to be seen whether the company reaffirms its long-term production growth guidance of 50%.

Investors may also want to know how the ramps in the newly-opened Gigas in Berlin and Austin are coming around, the timeline for the Cybertruck launch, and more details on the Robotaxi service Musk announced at the Cyber Rodeo event.

With Tesla hinting at another stock split, the potential split ratio is of interest to many retail investors, as evidenced by shareholder questions compiled by the company.

Musk could be asked on his interest in buying social media platform Twitter, Inc. TWTR, the financing plans for a potential buy and whether it will in any way dilute his focus on his flagship EV business.

Related Link: Why This Analyst Thinks Tesla's Growth Can 'Shock Wall Street' For Several Years

TSLA Stock Take: Tesla shares peaked at $1,243.49 on November 4 and were then seen moving in a broad range. The supply chain woes and market-wide pessimism amid the uncertain Fed rate outlook pressured the stock at the start of 2022. After bottoming in late February, the stock fought its way back up to a near-term peak of $1,079 in early April.

Musk's hostile bid for Twitter did not go down well with investors, and the stock has pulled back from its peak.

If the stock can hold support around $975, further upside is likely. A drop below the level could take it back to around $900.

The average analysts' price target for Tesla stock, according to TipRanks, is $1,006.04, suggesting modest downside from current levels.

Tesla shares closed Tuesday's session up 2.38% at $1,028.15, and were slipping 1.18% to $1,016.06 on Wednesday morning, according to Benzinga Pro.

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Posted In: EarningsNewsPreviewsTrading IdeasCredit SuisseDan LevyDaniel Iveselectric vehiclesElon MuskFuture FundGary BlackWedbush
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