Tesla, Nio, Rivian, Canoo stocks brace for a crucial week
Electric vehicle stocks have been relatively volatile recently as concerns about demand coincide with their undervaluation hopes. Tesla stock bottomed at $139 in May and then soared to a high of $270, propelling Elon Musk’s wealth to $270 billion.
Other EV stocks have followed that trend. Rivian share price has more than doubled from its lowest point in April, a move that has pushed its market cap to over $18 billion.
Nio, a leading Chinese EV company, has also bounced back from the year-to-date low of $3.62 to over $4.50. Canoo is also 83% higher than its lowest point this year.
Earning season continues
This will be an important week for American companies as some of the biggest ones will publish their earnings. Companies like Abbvie, AstraZeneca, IBM, Google, and ServiceNow will release their results.
Tesla earnings are important for both Wall Street and other EV stocks. In most cases, as we have seen recently, these EV companies do well when Tesla shares are thriving and vice versa. For example, most of them tumbled as Tesla dropped to $139 in May.
Tesla’s earnings will come at an important period for American companies. According to FactSet, 14% of all companies in the S&P 500 index have published their financial results this month.
The blended earnings growth was 9.7%, higher than the expected 8.8%. If this is the final figure, then it will be the highest quarterly growth rate since Q4’21. Most companies are also reporting stronger forward guidance.
Tesla earnings ahead
Analysts believe that Tesla’s earnings remained under pressure in the second quarter. Besides, the company has consistently missed the consensus EPS in the last three consecutive quarters.
The average revenue forecast is $24.7 billion, with the highest and lowest figures among analysts being at $28.4 billion and $23 billion, respectively. If the average figure is correct, it will mean that Tesla’s revenue dropped by 0.80% in Q2.
Analysts expect that Tesla’s revenue guidance for the third quarter will be $25.64 billion and its annual forecast will be $98.94 billion. These numbers mean that Tesla, a company that was used to generating double-digit growth has stalled.
The most recent delivery numbers revealed that Tesla produced 411,000 vehicles and then delivered 444,000 cars, The delivery figures were higher because they included vehicles made in the first quarter. Tesla made 433k vehicles in Q1 and delivered 387k.
The focus will be on the margins
In addition to the topline figures, investors will be looking at other things in Tesla’s earnings report.
First, traders will focus on Tesla’s margins, which have been falling recently because of its price cuts. Total gross margin moved from 19.3% in Q1’23 to 17.4% in Q1’24, a 200 basis point drop. There are chances that the drop in margins moderated in Q2 since Tesla did not make major price cuts during the quarter.
Operating margin has also dropped from 11.4% in 2023 to 5.5% while its adjusted EBITDA fell from 18.3% to 15.9%. Therefore, the Tesla stock price could bounce back if the company shows signs of improving margins.
The other catalyst for the Tesla stock price will be an update about Tesla’s promised cheaper car. Tesla believes that it can gain market share by investing in an affordable vehicle that is available to more customers.
Finally, Tesla has been investing in artificial intelligence (AI), especially in the autonomy and ride-hailing service. These investments explain why the Tesla stock price has done well in the past few months.
However, these moves appear to be facing headwinds as the company postponed its robotaxi business last week. Analysts believe that Tesla’s growth hinges on how well it implements the taxi business.
The AI and robotaxi hopes explain why Tesla is trading at a premium, with the price-to-earnings ratio sitting at 61. That is a big number for a company that is no longer growing.
Tesla stock price analysis
Doing a Tesla share price analysis before earnings is always difficult because of the volatility that ensues. Turning to the daily chart, we see that the stock peaked at $270.7 this month and then pulled back after postponing its robotaxi service.
Tesla remains above the 50-day and 100-day Exponential Moving Averages (EMA) and the 61.8% Fibonacci Retracement point.
It is also approaching the second resistance point of the Woodie pivot point of $230. Therefore, the stock will likely remain under pressure and retest $230 followed by the 50% retracement point at $220. The alternative scenario is where the stock will rise and retest the psychological point at $250.
Tesla’s stock price will have an impact on other EV companies like Nio, Rivian, Lucid Group, and XPeng. It will also impact on BYD, a Chinese company that has become the biggest competitor.
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