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A Comprehensive Tesla EPS Preview: 5 Items to Watch

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From Nothing to Something

EV giant Tesla will report earnings Wednesday, January 25th, after the market close. Since its IPO in 2010, Tesla (TSLA - Free Report) went from being an obscure automotive start-up (the first successful one in the U.S. in over 100 years) to the unquestionable leader in the fastest-growing segment of the car manufacturing market – electric vehicles. The company’s success has catapulted CEO Elon Musk to be one of the richest people on the planet, and one of the most popular follows on Twitter, a microblogging social media platform that Musk recently bought.

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The success of Tesla hasn’t gone unnoticed. Traditional automakers like Toyota Motor (TM - Free Report) , Ford (F - Free Report) , and General Motors (GM - Free Report) are producing more electric vehicles than ever before. They are doing their best to dethrone Musk and Tesla, while startups like Rivian Automotive RIVN and Lucid LCID do their best to scale. Tesla also has global competition from companies such as Chinese-based Nio Inc (NIO - Free Report) and LI Auto (LI - Free Report) .

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The Ultimate “Battleground” Stock

Recently, shares of Tesla have retreated as the overall equity market fell in 2022, inflation rose rapidly, and demand for EVs slowed. Since its inception, the stock has been a top battleground. Infamous short sellers such as Jim Chanos, famous for shorting Enron before its collapse and Michael Burry who shorted housing in 2008 and was played by Christian Bale in “The Big Short” have been outspoken critics. Meanwhile, others have made a fortune on the long side, such as Ron Barron, who founded Barron’s, and Larry Ellison, who cofounded software giant Oracle (ORCL - Free Report) .

Regardless of one’s view of the stock currently, it is worth paying attention to for all market participants - at the very least. Tesla has been a top performer over the past decade, is worth half a trillion dollars, and is consistently one of the most traded public stocks today.

Tesla Earnings Call: What to Watch For

As with any Tesla earnings release, there will be new announcements and headlines. Below are the top 5 things to watch in Tesla’s Q1 EPS release:

1.   Twitter CEO Update: In 2022, Elon Musk ventured into the social realm by purchasing Twitter for $44 billion. Since the acquisition closed, Musk is enjoying himself and has been spending time revamping the microblogging service. However, many Tesla investors and critics do not share Musk’s enthusiasm. They want his attention brought back to Tesla and away from his other ventures, such as Twitter and his rocket company SpaceX. Recently, Musk announced that he would be stepping down and ending his controversial time as CEO of Twitter and finding a replacement. Investors should be watching to see if Musk provides any updates in the earnings call on the matter.

2.   Clean Energy Update:Investors who have not followed Tesla long may have forgotten about another massive acquisition by Musk: Solar City. As the name implies, Solar City is Tesla’s solar company. Thus far, compared to Tesla’s EV business, the solar panel business has been disappointing. However, lately, the solar industry has produced several market leaders, including but not limited to First Solar (FSLR - Free Report) , Array Technologies (ARRY - Free Report) , and Maxeon Solar MAXN.

3.   New Products & Projects Updates: Tesla followers should be paying attention to updates to:

·      Semi-Trucks: Late last year, Tesla delivered the first batch of its semi-truck to a European subsidiary of Coca-Cola (KO - Free Report)

·      Full-self Driving: The company may provide updates on the progress of the project from a safety and regulatory perspective.

·      Cyber Truck:Tesla is shooting to deliver the first batch of its flashy and Martian-looking SUV concept, the Cyber Truck.

·      Gigafactory: While the pace of demand has slowed somewhat recently, the root of Tesla’s issues remain supply -driven rather than demand-driven. To fix this issue, the company is expanding its Gigafactory in Texas and planning to add another Gigafactory,

4.    EV Credit Commentary: Certain qualifying Tesla models and Tesla customers will be eligible for a $7,500 Federal Tax Credit for the first time in years.

5.   China Price Cut:Tesla’s China business is seeing massive demand amid a decision by the company to slash prices in the country. Following the announcement a few weeks ago, TSLA shares have soared. Management will likely give color on that decision and the Chinese economy in general. Chinese ADRs such as Alibaba (BABA - Free Report) and New Oriental Education (EDU - Free Report) have been on fire to start the new year.

As of the time of this writing, the options market is implying a $14 move in shares of Tesla, which is currently trading at $142. After a vicious countertrend rally in January, shares are approaching the underside of the 50-day moving average – a spot that is likely to be make or break shares in the short term.

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