Q3 ER vs. Q4 ER
The similarities are numerous between the lead-in to Tesla's 3rd Quarter earnings report vs. it's 4th Quarter earnings report. In both cases, the stock was trading in the 190s, close to its ATH. In both cases, expectations were high regarding the contents of the report. How will the market behave when the news comes out on Wednesday? Will we see a drop in share prices because those expectations weren't met or will we see Tesla climb higher? Here are some thoughts:
The negative:
* Tesla has already released 4Q deliveries of 6,900 vehicles, which has already been factored into the stock price. Savy investors likely have seen this level of output favoring Tesla's achieving a 25% Gross Margin and factored that in, too. GM would need to exceed 25% for the reaction to be positive.
* Elon has a tendency to underpromise and overdeliver. If expected performance for 2014 is understated too much, investors will be disappointed.
* We saw a big drop in stock price right after 3Q results. Those results were rather respectable, too. Many investors are spring-loaded to the "sell" position if 4Q results and guidance doesn't show something very positive.
* Model X could reduce Model S demand during 2014 in some markets as buyers wait for the SUV offering rather than buying the sedan.
The positive:
* It's all about 2014 guidance and Tesla looks like demand and production ability should allow a sizable increase in production.
* Much has improved at the company in one quarter. Output is up, Gross Margin is likely up as well, Model X is closer to release.
* China, China, China. Suddenly we see a market that could rival North America open up for 2014. If guidance accurately reflects this potential, and if Tesla is able to ratchet up production to better match the demand, investor reaction will be positive.
* Superchargers are now more widespread than in Q3. More superchargers equates to more potential buyers regarding Tesla as a long-range vehicle, not just a city or commuter car. Coast to coast record run by the two Teslas this past month showed this car is reliable for long-distance driving in bad weather.
* Potential of big announcements: Gigafactory or hint that highway safety board will give green light soon.
* No major fire issue: The downturn from Q3 results was hit hard by the Tennessee fire shortly afterwards, which prompted a highway safety investigation. We've gone through a quarter without any repeats of such incidents. The Toronto garage fire did not involve the big battery or the charging system. If there is an issue with Tesla S that caused the Toronto garage fire, it should not be a big deal to fix.
My prediction? Volatility!
