After the US market close today, Tesla (NASDAQ:TSLA) will report the latest quarterly earnings. As one of the most popular stocks among retail investors, the report will be closely watched. Tesla shares will likely be volatile leading up to the close, and again when the market reopens on Thursday. Here’s what I think is most important that I’ll be watching for in the latest earnings report.
Delivery numbers offer positivity
Earlier this month, we got a preview of the Q1 results. The delivery numbers were released on the first weekend of April. It showed that the company delivered 310,084 vehicles, up from the Q4 figure of 308,600. It was also up considerably against the same quarter last year, when 185,000 vehicles were delivered.
This trajectory of deliveries bodes well for Tesla shares, and also the upcoming earnings report. If the report highlights that it expects deliveries to continue to grow in Q2 and beyond, then this could provide a lift for Tesla shares in the aftermath.
This is feasible, given the expansion of new facilities. The notable one last month was the new gigafactory that finally opened in Germany. This is expected to boost production by up to 500,000 vehicles per year. If we get more details on this during the report, it could be a positive for the share price.
Supply chain issues could weigh heavily
One issue that does need to be followed closely is the impact of supply chain disruption. Tesla might flag this up in the earnings report as a reason why delivery numbers missed some analysts’ expectations. Further, due to a rise in Covid-19 cases, the factory in Shanghai has been closed for pretty much all of April so far. It’s back open now, but this could hamper the fast start to Q2 that the business was looking for.
Aside from the issues in Shanghai, Tesla might note that high inflation and other factors could contribute to supply issues as it tries to keep a lid on costs. Although this is a problem that the whole industry is facing, Tesla is the poster child for electric vehicles. So I think that if the business flagged up concern for 2022 around this point, investors could be spooked.
It could cause Tesla shares to fall, as people re-price their expectations of earnings for the rest of 2022. As I’ve mentioned before, the shares trade at a very high premium. The current price-to-earnings ratio is 208. One major reason for this is that investors believe earnings in the future are going to be higher than they are now, so are happy to pay an inflated price. Yet if the expectations shift lower, it should see the share price fall.
Lots to watch for from Tesla earnings
The Q1 report will be important to review. Even though I don’t own Tesla shares, I’ll still be following it closely to gauge the implications for the EV sector in general. But unless the shares significantly fall in value, I won’t be investing at the moment.
