cars parked in front of company building

Today sees the release of Q1 earnings for Tesla (NASDAQ:TSLA). Even after the preview on delivery numbers that came out in early April, there’s still a lot of speculation around what could be revealed in the earnings report. Here are three things that we are watching out closely for to help guide Tesla shares going forward.

Supply chain issues

Arguably the most important part of the report will stem from comments around supply chain problems. Although the company has managed to cope well so far, some analysts are pointing to the slight miss in expectations on delivery numbers as being caused by supply issues.

The numbers can be seen here, with Q1 deliveries being a new record at just over 310,000. This was up on Q4 2021, and a far cry from the 185k from the same period last year. However, some were forecasting a higher number.

If we get some comments that supply chain disruption is going to be a problem going forward, Tesla shares could struggle, even if financial metrics are good. This is because the stock trades based on a high future earnings multiple. At $1,000, the share price looks inflated when you compare it to current earnings. Yet if you believe that earnings down the line will be higher, this would be acceptable. A change in forecasted deliveries could change this.

Factory results

Another point we will be looking at is projected outputs from factories around the world. This could be positive or negative for Tesla shares depending on the slant. For example, the gigafactory in Germany that was opened last month is expected to have capacity for 500,000 vehicles to be produced each year.

However, the factory in Shanghai has been closed for three weeks during April due to Covid-19 lockdowns. The hindrance on production here could be a blow for the company as we head further into Q2.

As Tesla further expands production globally, it needs to ensure that regions are all firing together in order to satisfy customer demand outside of the US.

Future direction key for Tesla shares

The final point that we are flagging up is the trajectory for future delivery and production numbers for the business. There are many factors that could go into this. These include the rising cost of lithium, wage inflation globally, increased competition in the EV space and many other points. Some of these may be addressed in the earnings report today.

We think that unfortunately there are a multitude of headwinds that the company faces in 2022 that it’ll struggle to shake off. Given the current price, we won’t be looking to buy ahead of earnings, and would only contemplate buying should we see a material depreciation in coming days/weeks.

Leave a Reply