Tomorrow sees the releases of the second quarter financials for Tesla (NASDAQ:TSLA). We think that this will be a key driver for the share price in the short-term, as investors are keen to understand more around the fall in Q2 deliveries relative to Q1. Here are the main points we’re watching out for tomorrow.
Underlying supply issues
Hopefully we’ll get some information regarding the issues plaguing production recently. Part of this can be put down to the closure of the factory in Shanghai back in April due to Covid-19 measures. This is unlikely to occur again, so can write this off as a blip.
But regarding getting key parts for cars and other supply related issues, it’s a longer term problem. The market will be keenly watching for any initiatives that the business is taking to try and reduce the impact of this for future quarters.
It’ll also be good to note the outlook for future deliveries. We’ve gone from 310,048 vehicles in Q1 to 254,695 in Q2. Will this number move back above 300k next quarter or should be be expecting lower numbers for longer?
Addressing Musk’s comments
In the past month, the charismatic Elon Musk has made some interesting statements about Tesla. He spoke of how the factories in Austin and Berlin were “gigantic money furnaces” that were losing billions. Musk also made comments about the need to cut 10% of the workforce, something that is apparently already underway.
It would be good for the company to address these comments in more detail in the quarterly update. None of the news is a surprise, but I would expect some notes to reassure shareholders that action is being taken to keep a lid on costs. They could even highlight the breakeven point of production for these facilities, to show that it isn’t that far away.
Tesla had coped for several years of burning cash and losing money before reaching a breakeven stage. However, any move that flips the business back to being loss-making would certainly cause a knee jerk move lower in Tesla shares.
Direction post Tesla earnings
We currently hold a long position in Tesla. We acknowledge that growth stocks have been hit hard this year, but look to Tesla Q2 reporting to potentially kick start a rally. Clearly, the falling production numbers don’t setup for a great report, but the main thing here is if the actuals beat expectations. If we also get commentary regarding increasing production and cutting costs, then even a neutral report could kick Tesla shares higher.