As Tesla Drives Into Earnings, Is It at a Turning Point?

As Tesla Drives Into Earnings, Is It at a Turning Point?

After the automaker’s impressive stretch, here’s how I’d handle the stock now.

The shares of Tesla (TSLA)  ran 6% on Friday ahead of its quarterly announcement for vehicles delivered. On Monday, the shares popped for an additional 10.2%. The stock has now closed up from the day prior for six consecutive trading days, rising a jaw-dropping 26.7% since the close on Monday, June 24. No, I was not in Tesla for this incredible run. That’s a claim that I cannot make. What now, though? What now that Tesla has yet again, taught all of us old dogs a rude lesson for not believing?

The Goods: 443,956 EVs

Tesla shares are up again overnight and now trading at their highest level since January. The electric vehicle manufacturer delivered 443,956 EVs during the second quarter, while producing 410,831 vehicles. Make no mistake, deliveries were down a rough 5% year over year, but consensus view had been for about 439,000 deliveries and the whispers I heard were on the downside.

Many had believed that Tesla still had “robotaxi” to look forward to as an automobile manufacturer, but beyond that, the automaker would have to lean on generative artificial intelligence and robotics to provide the kind of sales growth that shareholders had come to expect. These deliveries give rise to the idea that maybe, just maybe, the consumer is not quite done with Tesla just yet. Maybe market demand for electric vehicles is not quite at the saturation point. Maybe, there are still converts (from legacy ICE vehicles) to be made.

Wall Street Revs Up

Since Tuesday morning, seven highly rated analysts have opined on TSLA. After allowing for adjustments, there are three “buy” or buy-equivalent ratings, three “hold” or hold-equivalent ratings and one outright “sell” rating among the seven. Two of the “holds” offered up no target price, leaving us with five of those to work with.

The average target price across those five analysts came to $226.40 with a high of $310 (Adam Jonas of Morgan Stanley) and a low of $120 (Toni Sacconaghi of Bernstein). Interestingly, Dan Ives of Wedbush, who is a longstanding Tesla bull, increased his target price from $275 to $300.

In doing so, Ives commented… “With the majority of price cuts in the rearview mirror and demand stabilization globally for EVs especially in China, we believe Tesla’s march towards 2 million units’ annual trajectory should be reached over the coming quarters with clear momentum and easier comps for 2025.”

On the other hand, Sacconaghi raises concerns about ten firm’s competitive position and product pipeline. Sacconaghi is predicting that new, lower-cost models probably will not stimulate demand to a significant enough degree. He also sees Tesla facing recurring challenges with even more intense competition from abroad in coming years.

Earnings Expectations

Tesla is now expected to report second-quarter financial performance after the closing bell on July 23. Wall Street sees unadjusted earnings per share of $0.49, adjustable to $0.59 on revenue of roughly $24 billion. This would compare to the year-ago comps of an adjusted $0.91 on $24.93 billion, so clearly, Wall Street still expects to see significant earnings contraction on contracting revenue generation.

Getting a ‘Handle’ on the Chart

Believe it or not, if TSLA breaks out, this wasn’t it. at least not yet. The stock is still developing a cup pattern with a $265 pivot. That said, Relative Strength is probably too strong, and the daily moving average convergence divergence oscillator has nearly gone parabolic, while the stock has retaken its own 200-day simple moving average. This is potentially setting up the addition of a handle to this “cup.”

Once the handle is created, the pivot moves from the left side apex of the cup to the right-side apex of the cup. What that means for investors, is that $265 probably is not going to be this stock’s real pivot. Once we see a short-term sell-off that likely fills the gap down to $213, the stock will either be primed for the next leg up or fail.

So, the short-term trade appears lower, despite what we’ve seen this week. But once that recently created gap is filled, then all bets are off, and the July 23 earnings release becomes the focus. Ives and Jonas or Sacconaghi? They’re all pretty good. They can’t all be accurate. For those interested, July 26th $210 puts are currently paying about $4.65. I personally would not sell those without purchasing a lower strike price, same expiration date equal number of puts as protection.

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