Tesla (TSLA) Under Pressure After Missing EPS Estimates

Tesla, Inc. (TSLA) is trading down 3% in Thursday’s premarket after missing fourth-quarter 2020 earnings estimates by $0.23 per share, gaining just $0.80 per share. Revenue rose 44.9% year over year to $10.7 billion, beating consensus estimates of $10.38 billion.

Gross margin fell to 24.1% from 27.7% in the third quarter, while deliveries jumped 61% year-on-year to 180,667, supported by 75% growth in Model 3 deliveries The average selling price fell 11% as sales shifted to less expensive models. CEO Elon Musk now forecasts 50% annual growth in vehicle deliveries.

Key points to remember

  • Tesla largely missed fourth-quarter earnings expectations.
  • The company expects an annual growth of 50% in deliveries.
  • Tesla’s share price has doubled since November, rebounding overbought readings.
  • The stock may have completed a Elliott five waves advance.

To look closer

The electric vehicle (EV) maker has been profitable for six straight quarters, but accelerating regulatory credit sales have supported some of the green ink, darkening the balance sheet. That revenue jumped 202% to $401 million in the fourth quarter. Sales in China have continued to grow at a healthy pace, with many analysts predicting that 40% or more of total sales will come from this part of the world by 2022.

JMP Securities downgraded Tesla stock to “Market Perform” after the release, with more analyst calls expected to follow on Thursday. The Wall Street consensus now stands at a mixed “Hold” rating, based on 11 “Buy”, one “Overweight”, 15 “Hold”, three “Underweight” and eight “Sell”. Price targets currently range from a low of just $67 to a high of $1,036, while the stock is expected to open Thursday’s session around $300 above the midpoint target of $515.

Point

Gross margin is a firm’s net sales minus its cost of goods sold (COGS). In other words, it is the revenue a business retains after incurring the direct costs associated with producing the goods it sells and the services it provides. The higher the gross margin, the more capital a business retains on every dollar of sales, which it can then use to pay other costs or settle debts. Net sales are simply gross revenue minus returns, allowances and discounts.

Tesla weekly chart (2013-2021, logarithmic scale)

TradingView.com


The stock took off in historic growth in the second quarter of 2013, going from a adjusted according to distribution $6.76 in the upper $50 in 2014. Price action then settled into a trading range, bounded by resistance at this level and Support in the middle of $30. A breakdown in the first quarter of 2016 was bought aggressively, bringing the price back to range resistance, before an April 2017 breakout that added around 25 points before stalling a month later.

Four breakout attempts in the fourth quarter of 2018 failed, before a breakdown that sent the stock tumbling to a two-year low in 2019. This marked a historic buying opportunity, ahead of a powerful surge of buying that hit $194 in Feb 2020. fell more than 120 points during the pandemic decline and recouped that loss in June, setting off a multi-wave uptrend that posted another all-time high in the trading session. Monday.

September to November symmetrical triangle The trend ran on extremely overbought readings in time rather than price, revealing intense demand when most analysts were expecting a deeper correction. The stock more than doubled in January 2021, possibly signaling a peak of buying, ahead of calmer price action. However, it’s too early to put a nail in Tesla’s rally coffin, given the plethora of failed bets against the title in recent years.

Still, a few technical red flags have popped up in recent weeks. For starters, January’s monthly price bar is 100% off the top Bollinger Band®. This has been an extraordinarily reliable sell signal, so the overnight sell-off has the ability to turn into a multi-day rout. Additionally, the broad price structure since June 2019 has carved out a five-wave Elliott lead, with the fifth and final wave marking the potential end point of the uptrend.

Point

A pulse wave pattern is a technical trading term that describes a sharp change in the price of a financial asset coinciding with the main direction of the underlying trend. It is frequently used in discussions of Elliott wave theory, a method of analyzing and forecasting price movements in financial markets. Impulse waves can refer to upward movements in uptrends or downward movements in bearish trends.

The essential

Tesla sold Thursday morning after failing to meet fourth-quarter profit expectations.

Disclosure: The author held no position in the aforementioned titles at the time of publication.

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