US earnings are in focus this week, with Tesla due to report its first-quarter earnings on Thursday. There has been a lot happening around the electric car maker lately, and CEO Elon Musk is staying in the spotlight with his tweets on Twitter. Tesla has reportedly delivered 310,000 in the first three months, a 68% jump YoY, suggesting the industrial pioneer may amaze markets with another record result. However, risks remain with ongoing disruptions to the supply chain, rising energy costs, and production suspension due to China’s lockdown.
Output capacity in focus
The common metric for Tesla is the capacity of output as demands have been outpacing supplies. In short, Tesla will easily keep the rapid growth if it can produce as many cars as it can. In the first quarter, Tesla produced 305,407 cars, shy of estimates, but still a meteoric jump in numbers annually. Its newly opened Berlin “Gigafactory” is expected to produce about 500,000 cars per year, but it will take time for the hub to run at its full capacity. With weeks of production suspension in Shanghai due to lockdowns, Tesla’s outlook for delivery for the second quarter might be a concern, but the speed of growth of the electrical motor maker is unarguably far ahead of its rivals and other mega-cap companies. According to Bloomberg, Tesla accounts for 80% of the market share in the 6 EV-only makers globally. Tesla’s average annual growth is 72%, with EPS increasing 754% by Q4 2021. Wall Street’s forecast on Tesla’s EPS is $2.27, and $17.85 billion for the first quarter.
It is also expected that Tesla will strongly hold up despite rising costs of raw materials and ongoing supply chain issues. Tesla has secured its nickel supply with multiple miners, including BHP Group Ltd. and Talon Metals Corp. The pursuit of lithium mining and refining businesses may also add to optimism. Analysts expect Tesla could hit 2 million cars in production yearly in 2022.
Tesla bids on Twitter
Tesla’s approach to buyout Twitter is in the spotlight ahead of the earnings report. CEO Elon Musk offers $43 billion to take over the social platform, with Twitter’s board of directors countering with a so-called “poison pill”, issuing a new rights plan aiming to block the attempt. But it could have minor impact on Tesla’s share price as investors do not see a direct relation between the two unless Elon sells Tesla’s shares to finance the deal.
Watch the 1,153 bullish trigger level on Tesla(Click to see the enlarged chart) (Click to see the enlarged chart)
Source: CMC Markets & TradingView as of 18 Apr 2022
From a technical analysis perspective, the share price of Tesla (TSLA) has been sandwiched between the forces of bulls and bears in the past five months since its current all-time high of 1,243.30 printed on 4 November 2021.
On the positive side, TSLA has managed to stage a rally of +64% from its 700.10 low of 24 February 2022 to the 4 April 2022 high. It has also managed to reintegrate back above the key psychological 200-day moving average on 17 March 2022 on the backdrop of a looming high cost of funding environment as seen by the rapid pace of increases in the US 10-year Treasury yield in the past six weeks which tends to be detrimental to growth stocks with weak balance sheets in general.
In addition, TSLA’s relative strength as measured against the benchmark US stock indices; S&P 500 and Nasdaq 100 (depicted by the ratio charts) has been gaining a positive trajectory since 28 March 2022 which suggests further potential outperformance of TSLA against S&P 500 and Nasdaq 100.
Watch the 900.30/884.40 key medium-term pivotal support and a break above the immediate descending resistance of 1,153 may trigger the start of an impulsive up move sequence towards the next resistance of 1,310/350 (upper boundary of the medium-term ascending channel from 24 February 2022 low & a cluster of Fibonacci extension levels).
However, a daily close below 884.40 negates the bullish tone for a further drop towards the next support at 763 within its 5-month sideways range configuration.