Tesla Motors (TSLA) Q4 earnings preview

The controversial company faces on its biggest challenge yet as analysts continue to raise expectations into the stratosphere...

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Following a nearly 750% rally in 2020 (and another 17% gain so far this month), Tesla Motors (TSLA) has become the hottest, most-traded stock on the planet. With the company set to report Q4 earnings after the bell on Wednesday, the 27th of January, the controversial company faces on its biggest challenge yet as analysts continue to raise expectations into the stratosphere.

Analysts are expecting the company to report $0.99 in EPS on revenues of $10.3B per the Bloomberg consensus estimate. Arguably more important than the numbers for Q4 will be management’s outlook for 2021 and beyond; Tesla has always thrived on selling its vision for the future of transportation, and the stock may therefore be able to shrug off a small miss in its financial metrics if it lays out an optimistic view for future operations.

In that vein, traders will be keying in on three key themes from TSLA’s earnings report:

1)     Expansion into India

The company recently announced it would be moving some operations into India as part its plans to eventually produce 20M electric vehicles per year (for comparison, the company built 500k cars in 2020). India offers a fast-growing, young, tech-savvy workforce, so a successful expansion into the country could pave the way for strong operations in the years to come.

2)     Solar roof

Tesla’s CEO Elon Musk, now the richest person on the planet following the surge in TSLA’s stock price, recently said that the company’s solar roof is “a killer product” that “will become obvious next year.” The company can reportedly install the roof on most residential buildings within a day and it comes with a 25-year warranty. The company has clearly captured the public’s imagination with its automobiles, and Elon Musk and company will be looking to capitalize on its brand familiarity to expand into other industries in the years to come.

3)     Competition from traditional automakers

While TSLA certainly enjoys a “first mover advantage” of sorts in the electric vehicle market, traditional automakers are nipping at the company’s heels. For example, GM has announced that it will be producing at least 20 EVs by 2023 as part of its vision for a zero emissions future. Meanwhile, Volkswagon tripled its EV deliveries in 2020. With its “priced-for-perfection” valuation, any signs that other automakers are cutting into TSLA’s dominance of this fast-growing industry could lead to a sharp reversal in the stock.

TSLA technical analysis

Looking at the chart, TSLA has spent the last two weeks consolidating in the low-800s after setting a fresh record high on the 8th of January. The recent sideways price action has allowed the daily RSI indicator to drop back out of “overbought” territory, clearing the deck for potential volatility in either direction.

With bulls and bears in perfect balance at the moment, the company’s Q4 operating results will likely be the catalyst that determines whether the jaw-dropping rally extends further to above $900 or whether the bullish fever breaks and the stock falls back toward its 21-day EMA in mid-$700s or lower:

Source: TradingView, GAIN Capital

For more on the history of Tesla Motors dating back to 2013, see our recently-published summary of key developments at the firm.

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