* Reports results 4Q 2019 on Wednesday, January 29 after the close
* Revenue expectation: $ 6.95 billion
* EPS expectation: $ 1.64
Looking at the Tesla stock price (NASDAQ :), the company does not seem to have a difficult task when it reports its fourth quarter next Wednesday. Investors, who have seen their shares rise sharply in the last three months, are already convinced that the troubled electric car manufacturer has turned the corner.
After reporting a surprising third-quarter gain in October, Tesla's shares suffered a tear, have since risen by 125% and closed yesterday's session for the third consecutive day at $ 572.20.
Behind this dramatic rally are the strong car sales for the last quarter, the announcement by CEO Elon Musk that he is ahead of schedule for the release of his next product, the Model Y crossover, and the setting up of his "giga factory" in Shanghai time.
The company announced earlier this month that it delivered a record number of 112,000 vehicles in the fourth quarter and has begun production in a new plant near Shanghai, where it builds 1,000 Model 3 sedans every week.
The impact of these developments is so powerful that for the first time Tesla values ??more than $ 100 billion, more than Volkswagen (DE :), which sold nearly 30 times as many vehicles last year. For 4Q, analysts expect on average a profitable quarter if revenue rises to $ 6.95 billion.
This turn came after a very troubling year for Tesla, astonished by the confidence of investors in the company's founder, who amazed the shareholders with a plan to make the company private.
These missteps, along with a series of broken promises, forced many top analysts to downgrade Tesla's stock and even question the seriousness of Musk & # 39; s mission to disrupt the traditional automobile industry.
China is a swing factor for Tesla (NASDAQ 🙂
For Tesla bulls, that ambitious goal is suddenly within reach after recent breakthroughs. The completion of the Shanghai plant and the company's success in surpassing the ambitious goal of selling 360,000 vehicles for the year are a powerful sign that Tesla can quickly become a major player in the industry if it continues to meet its goals .
Despite this optimism, it is not clear whether China will soon become a profitable venture for Tesla. The sale of electric vehicles has weakened in China in recent quarters as the government reverses subsidies on vehicles with alternative energy.
A slowing car market in China, the abolition of US tax credits for Tesla buyers and the risk that Musk again fails to deliver on his promises are some of the main obstacles that can delay the rally of shares in 2020. company had a similar strong finish as 2018, but produced huge losses for shareholders in the first half of 2019.
In order to consolidate its position, Tesla has to demonstrate in the coming quarters that it can translate all these benefits into generating a consistent, free cash flow and can reduce its debts. But the problem with the company's stock is that it reacts too wildly to bad news, making it a favorite target for speculators.
Despite the explosive gain of shares this year, the street is still divided over Tesla's outlook. Although at least eight analysts have increased their price targets by more than $ 100 since the beginning of the year, according to Bloomberg data, the consensus is still much lower than where the Tesla shares are traded. The average target is $ 363.92 with only 10 analysts assessing the purchase, compared to 10 owns and selling 16.
Bottom Line
There is little doubt that Tesla is back on the right track after boosting its production and building a factory in China that could represent a breakthrough for the company's long-term profitability.
But the groundbreaking automaker must be able to quickly demonstrate that all of these milestones help the company achieve sustainable profitability and that the good times are here to stay, unlike so many of its previous boom-and-bust cycles . Next week's earnings could very well be a make-or-break event for the Tesla rally.
