Tesla’s share price has been going down a gear for the past four months. The stock was north of $1,100 in early April, but in late May it dropped below the $620 mark, which was its lowest in 11 months. In April, the group posted good first quarter figures but fears about rising inflation, supply chain issues and Covid-19 resections in China hurt the stock. Since late May, the Tesla share price has recovered a little, but it has struggled to break above the $766 mark. Judging by the fact the stock has seen a limited recovery, it indicates that traders are not too hopeful for this week’s second quarter update on Wednesday.
The group’s first quarter figures impressed traders as earnings per share was $3.22, which sped past the $2.26 forecast, and the revenue was $18.76 billion, while analysts were expecting $17.80 billion. Automotive revenue made up the lion’s share of revenue as it was $16.86 billion, up 87% on the year but because of the pandemic, the revenue figure was starting from a low base. Gross margins on vehicles rose to a record of 32.9%, and that is encouraging as it shows the company is getting more out of earn dollar received. This metric will be closely watched on Wednesday as traders will be wondering if the rise in expenses is taking its toll on the bottom line.
A few weeks before the first quarter financial figures were released, Tesla published its production report. 310,048 vehicles were delivered and that came in below the 317,000 forecast. Model 3 and Model Y cars accounted for 95% of the vehicles. China’s zero-Covid policy saw resections being reintroduced and that impacted production at its Shanghai operation. Company’s like Tesla are still feeling the effects of the pandemic as there is a shortage of semiconductors. As a result, some customers in the US have had to wait for months before their car is delivered. The auto industry is facing the same problems as everyone else as supply chains are not operating as fast as they once were, and inflation is starting to bite. Elon Musk, the CEO, fears that inflation is higher than the CPI report suggests, and he feel that prices will remain high throughout the year.
Despite the challenging economic backdrop and the temporary shutdown at the factory in China, Mr Musk is confident the company will boost vehicle production by at least 50%. Last year, Tesla delivered 936,172 vehicles, so that suggests delivery of at least 1.4 million vehicles this year.
The Tesla share price has been trading in a small range recently amid low volatility. The RSI is in the middle of the range, indicating there is no strong price bias in either direction. While the stock holds above $648.47, the short-term uptrend could continue. $792.50 or $887.32 might act as resistance. A break below $648.47 could see it target $620.55 or $600.00
Tesla will release its second quarter numbers on 20 July.