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TESLA – Q2 2020 Earnings

TESLA, Daily

TESLA Inc. report 2020 Q2 Earnings on Wednesday July 22 after the North American markets have closed at 20:10 GMT. Even by TESLA and 2020 standards, the company and the company’s share price have had a truly extraordinary 12 months. This time last summer, July 21 2019, the price closed the trading day at $228.00 – fast-forward to July 20 2020 and the price rallied an unprecedented $142 in a single day (9.47%) to close at $1643.00. This time last year we wrote this about the electric car maker, and although a lot has changed in 12 months, nothing has changed.

“One of the most high profile of companies, TESLA has faithful followers and investors in their undoubted visionary founder and CEO Elon Musk. However, with a collapsing share price, problems reaching production targets and volumes, and legendary capital expenditure burn rate, the once darling of Wall Street is under the most significant pressure to deliver. The share price fell during the first quarter, moved a leg lower in April and collapsed during May. The share price closed trading in May at $185.16, representing a 46% reduction in value in less than five months, and even the purchase of over 100,000 shares by the CEO at the beginning of the month at $243 per share (investing $25 million) has not stopped the share price slide. Barclays is the latest firm to issue a downgrade, predicting that Tesla is more likely to become a “niche luxury” car maker than a mass-market one, with analysts cutting their price target to $150 from $192.

So what has gone wrong and where does the company go from here? Investors appear to be losing faith in the always colourful and controversial Elon Musk with his constant missed delivery deadlines, key executive departures and the constant cash burn. Market sentiment also appears to be waning with what once an innovator now was simply trying to survive as more global competition arrives from both technology companies and the traditional automotive sector. However, Tesla and Mr. Musk have been down here before; in the spring of 2016 the share price moved some 90% in two months following a 50% sell-off over the previous 18-months. Is it different this time? – Only time will tell.”

The last 12 months has finally seen TESLA turn a profit and meet and even exceed those key production and delivery targets. Q1 Earnings were a huge surprise and a big beat to the upside, and though EPS was expected to show a decline of -$0.53 on revenues of $5.7 bln, the results showed EPS at $1.12 and Revenues in excess of $6.00 bln.

The massive rally in the share price during July has been on the back of key deliveries which were announced on July 2. Tesla confirmed they had delivered 90,650 cars and had produced ‘over 82,000 vehicles’ between April and June, significantly beating low expectations due to the COVID-19 pandemic and the high profile closure of the California plant. Deliveries were down roughly 5% versus the same period last year, but it was surprisingly good considering the broader auto industry took a significantly larger hit.

Consensus for Q2 revenue and EPS, as ever, splits opinion, however, Wall Street is expecting revenue during the quarter of $5.146 billion, Estimize, the financial estimate crowdsourcing website, predicts a higher revenue of $5.443 billion, and Earnings Whisper much lower at $4.67 billion. On the EPS front, Wall Street consensus is expecting a loss of $0.14 per share for the quarter, while Estimize’s prediction is actually a slight profit of $0.19 per share and Earnings Whisper has a loss of $0.23 per share.

The big Wall Street firms have also upgraded estimates within the last month as the share price has rocketed, and again opinions are widely divided. The most Bullish is Piper Sandler who have upgraded their advice to Overweight and increased their target price from $939 to $2322. CITI and JP Morgan are at the other extreme with SELL ($246-$450) and Underweight ($240$275) respectively. Others include Credit Suisse (Neutral; $700-$1400), Goldman Sachs (also Neutral $950-$1300) and Morgan Stanley (Underweight $650-$740).

Technically, the Daily chart breached the 20-day moving average back on April 6th at $518.16 and has moved higher ever since, stalling at $1,000 into the end of June only to become everyone’s favourite stock in the last three weeks peaking at $1,790 last week. The RSI has been as high as 83 and in the overbought zone all of July; the price is currently 30% over the 20-day, 60% over the 50-day and 158% above the 200-day moving averages but continues to attract buyers ahead of the hard data. In early US trading a day before the results TESLA trades at $1630. The next Resistance stands at $1,700, $1,750 and then $1,860 with support at $1,500, $1450 and $1,375. The Daily pivot point sits at $1,595.

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