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Tesla Needs a Blockbuster Earnings Report on Wednesday to Avoid a Massive Selloff

Last Updated September 23, 2020 1:32 PM
Kiril Nikolaev
Last Updated September 23, 2020 1:32 PM
  • Tesla is scheduled to report its fourth-quarter earnings this week.
  • A strong earnings beat coupled with an uptick in delivery guidance can help justify Tesla’s valuation.
  • Encouraging updates regarding the pace of production in the Shanghai Gigafactory can help the company’s cause.

Tesla (NASDAQ:TSLA) is slated to release its fourth-quarter earnings report on Wednesday at 3:00 pm EST. In the last six months, the company’s stock has more than doubled. Investors are anxious to know whether the electric car manufacturer’s over $100 billion valuation is justified.

Tesla outperforming the S&P 500
Tesla outperforming the S&P 500. | Source: Investopedia 

Tesla shares are now trading at over 100 times the projected 2020 earnings, so the earnings update must deliver impressive numbers. Otherwise, a less than stellar Q4 report might give investors an excuse to take profits.

Here’s what to look for in the report to determine if Tesla can maintain its bullish momentum.

An Earnings Beat That Can Get You Dancing Like Elon Musk

Elon Musk’s electric car empire is expected to print quarterly earnings of 1.62 per share  and revenue of $6.95 billion . Anything less than these numbers and the stock is vulnerable to a selloff.

Fortunately, analysts are optimistic on the fourth-quarter performance of the company. A Seeking Alpha writer projects an earnings beat with an EPS of $2.47 , which offers an over 50% upside from consensus estimates. Earnings Whispers forecasts an EPS of $2.24 and revenue of $6.99 billion .

As an investor, these are the numbers that would get you dancing. An earnings beat of this magnitude would show that Tesla can be a very profitable company.

A Strong 2020 Delivery Guidance

Tesla can further justify its extremely high valuation with a rosy company outlook. The company is expected to provide a 2020 delivery guidance during the earnings call. In 2019, Tesla sold more than 367,500 cars , which more than meets its guidance for the year of 360,000 deliveries. This year, analysts are expecting the company to deliver 500,000 units.

The good news is that Wedbush analysts believe  that the number is quite reachable as demand for Tesla is strong in China and Europe. Should the company provide a delivery guidance north of 500,000, then it’s very likely that investors will line up to buy more shares.

Encouraging Updates from Tesla’s Shanghai Gigafactory

One of the reasons why investors are upbeat on the stock is because of the recently opened Shanghai site. Many believe that the Gigafactory will help the company gain a strong footing in China while cost-effectively manufacturing new Teslas.

Earlier this month, the company reported that the factory has produced less than 1,000 cars . It will take more than to keep investors from parting with their shares. The rate of production must exceed expectations. Otherwise, the hype conjured by Elon busting out his moves might quickly fade.

There’s no doubt that Tesla must wow their investors. The company must not give them a reason to cash out while shares are trading close to their all-time high.

Disclaimer: The above should not be considered trading advice from CCN.com. The writer does not own shares of Tesla (TSLA).