- Earnings optimism drives 8% jump in shares
- Outlook for prices also likely to be crucial
- Musk in court accused of defrauding investors
Shares in electric vehicle-maker Tesla (TSLA:NASDAQ) jumped nearly 8% yesterday to $143.75 as investors bet on fourth-quarter earnings beating estimates.
The results will be released after the market close tomorrow, 25 January, with the firm expected to post adjusted EPS (earnings per share) of between $1.15 and $1.20 against $0.85 per share a year earlier on revenues of $25 billion compared with $17.7 billion the previous year.
PRICING IN FOCUS
One key area of concern is the revenue outlook for this year, after the company announced two weeks ago it would cut prices by up to 20% on some models in order to boost sales.
Analyst Toni Sacconaghi at Bernstein argues Tesla badly miscalculated the success of its Model 3 and Model Y vehicles, believing they would sell between three and four million units a year which would have sustained sales until a new model arrived.
While the arrival of the Cybertruck next year will help, ‘the key challenge for Tesla is that it needs more, lower-cost EV offerings, and we don’t expect a new, low-cost offering to ship in volume until 2025, by which time Tesla will face even more EV competition’ says Saconnaghi.
As a result, the firm had no option but to cut prices to shift unsold cars, which has had ‘a huge impact’ on Tesla’s economics according to the analyst, who has cut his current-year earnings estimate from $4.96 - which was in line with the consensus - to just $3.80 per share.
UP BEFORE THE JUDGE
Meanwhile, chief executive Elon Musk had to testify in court last week in defence of the infamous tweet he sent in August 2018 claiming he had secured the financing to take Tesla private at $420 per share.
Musk, who has been accused in a class-action lawsuit of defrauding investors, claimed he had met with representatives of a Saudi Arabian sovereign wealth fund who indicated they would support the $72 billion deal.
Once it became clear the money wasn’t in fact in place to take Tesla private, Mr Musk was sanctioned by the SEC (Securities and Exchange Commission) and stepped down as chairman but kept his position as chief executive and has refused to admit to any wrongdoing.
