⚡After Microsoft, time for Tesla report. Will Musk surprise Wall Street?📊

1:35 PM January 25, 2023

Tesla (TSLA.US) will present its Q4 2022 results after today's Wall Street session, traditionally followed by a conference call where management's statements will be closely followed by analysts. The end of the year was difficult for Elon Musk's company. Stocks scrubbed the bottom, China's Covid Zero policy weighed on sentiment, and concerns about global demand, consumer health and recession led analysts to recognize the risks weighing on the company's stock. Wall Street expects the company to post its slowest sales growth in the past 10 quarters:

Revenue; $24.025 billion vs. $17.72 billion in Q4 2021, up 35.6% y/y (Refinitiv) 

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Earnings per share (EPS): $1.13 vs. $1.05 in Q3 2022 

Gross margin: 28% vs. 30.6% in Q4 2021

  • Analysts expect margins to decline to 25% in 2023 vs. 29% in 2022. Refinitiv forecasts slowest net profit growth in 3 years;
  • Production of 439,000 models in Q4 record-breakingly missed deliveries of 405,000 models (31% y/y growth), raising concerns about demand and margins. Additionally, Tesla had 30,000 vehicles in inventory or in transit at the end of Q4, which will likely weigh on results;
  • Weaker sales in China, affected by the 'covid zero' policy, may also weigh. On the other hand, a little more optimism on the condition of Chinese consumers was shed by a recent report from luxury watch manufacturer Swatch (UHR.CH), which reported great sales in the Middle Kingdom in Q4;
  • A key question for Wall Street will be to what extent an improving outlook for the demand side can 'make up' for the company's declining margins. Tesla's lower deliveries negatively disappointed analysts, but the company stands to gain from the Inflation Reduction Act (IRA) through price cuts and increased production;
  • With government rebates (up to $7,500) in the U.S. demand may increase, Tesla has offered large discounts on vehicles in recent months. In early January, discounts in China and the US were as high as 20%. It will be important to see how pricing policies affect sales and margins. Tesla's shares are up more than 30% this year.

2023 will be... better?

  • Tesla has increased production at two factories in Germany and the U.S., which analysts say will help cut costs, offset losses from discounts and can reduce concerns about demand. According to YipitData, orders in the US increased after the price cuts;
  • Morningstar noted that the important indicators in Tesla's results will be the average selling price and production cost, and Q4 results could be an important indication for the whole of 2023;
  • Wedbush Securities analysts believe Musk should abandon his original assumptions of 50% growth in deliveries each year and 'make it realistic' in the neighborhood of 35-40%. In 2022, delivery growth was 40%;
  • It is unclear whether Musk will speak at the conference; the company has scheduled an 'Investor Day' in March. However Wall Street expects a comments on the Twitter confusion and the stock sell-off in recent months. Shares of EV manufacturers will be sensitive to today's Tesla report and possible Musk's comments.

Tesla (TSLA.US), D1 interval. The price is in a downtrend below the SMA200 and SMA100. The bulls managed to rise above the 71.6 Fibonacci retracement of the upward wave started in the spring of 2020, at $135. Now this level will provide potential support in the event of a disappointment in the results, while the limit of the upward reaction may be set by the 61.8 Fiboo retracement at $174. Source: xStation5

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