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Plugging Into Tesla Earnings: Could It Be a Fifth Consecutive Profitable Quarter?

Ahead of Tesla’s third quarter report, investors seem to be wondering whether the electric vehicle maker was profitable for a fifth quarter in a row and whether it’s on track to deliver 500,000 vehicles this year.

https://tickertapecdn.tdameritrade.com/assets/images/pages/md/Start your engines: Tesla Earnings Report
5 min read
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Key Takeaways

  • Tesla delivered a record 139,300 vehicles during the third quarter
  • Analysts expecting a fifth consecutive quarter of profitability
  • Battery Day disappoints investors during a volatile third quarter for TSLA stock

On Wednesday after the close, Tesla (TSLA) is scheduled to pop the hood to give investors a look at its performance during the third quarter, which was a wild ride for the electric car maker’s shares.

One question is whether TSLA can report a profit for the fifth quarter in a row.

Last time around the company handily beat expectations, posting positive earnings per share when analysts had expected a loss. For Wednesday’s report, a consensus of analysts is expecting earnings of $0.56 per share on revenue of $8.26 billion.

Can TSLA Deliver 500,000 Vehicles This Year?

In addition to seeing whether TSLA’s results will top expectations again, TSLA investors are likely to be looking for additional clues as to whether the electric vehicle maker is on track to deliver 500,000 vehicles this year. In January, it said deliveries should “comfortably exceed” that milestone.

Earlier this month, the company said it delivered a record 139,300 vehicles during the third quarter, bringing its total for the first nine months of the year to 318,350.

A few days after the latest numbers were released, industry blog Tesmanian reported that CEO Elon Musk told TSLA employees in an email that the company has a chance to make 500,000 vehicles this year, depending on how things go during the fourth quarter. While production numbers are different than delivery figures, producing 500,000 vehicles in a year wouldn’t be too shabby either.

Deliveries of Model 3s made in China have helped boost Tesla’s delivery figures. Investors will also likely want an update on the ramp up at Tesla’s Shanghai factory, where construction is ongoing on its Model Y line and deliveries are expected to begin next year.

A Stock Split, a Battery Event, and an Overall Volatile Quarter

On Aug. 11, the company announced a 5-for-1 stock split, and shares went on a tear (see chart below). Retail investors often use stock splits as trading opportunities, accessing popular names that may have gotten too expensive pre-split. But sometimes buying interest cools off a little post-split, and some analysts were warning that Tesla’s shares might have been approaching overheated territory.

After the split, shares retreated. There was pressure from broader selling in tech-related names in early September. News of a planned General Motors (GM) partnership with auto-tech newbie Nikola (NKLA) as it ramps up its foray into electric- and hydrogen-powered cars also weighed on TSLA, as did news that TSLA didn’t get included in the S&P 500 Index (SPX), despite meeting the eligibility requirement of four consecutive quarters of profitability by generally-acceptable accounting principles (GAAP). Such an inclusion would have meant that a lot of index funds would have to buy shares so their holdings match the index components and weightings.

The company’s shares began moving higher once again, but then got hammered after the company’s Battery Day event. Even though investors seemed to be underwhelmed, Tesla still appeared to be taking steps in the right direction. At the event, Musk said battery costs would come down by half over the next several years and said the company could produce a $25,000 car on par or slightly better than a comparable gasoline car in three years.

While other competitors are expanding in the electric vehicle market, batteries remain the linchpin, and it seems that Tesla has a solid position on that front.

FIGURE 1: TESLA A LAGGARD? SAY WHAT? Considering the 6-month run for shares of Tesla (TSLA - candlestick), one would be hard-pressed to call it a laggard. But when compared to the Consumer Discretionary sector (IXY - purple line), it’s clear to see that it’s not just electric cars that have been attracting those discretionary dollars. Data sources: Nasdaq, S&P Dow Jones Indices. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.

TSLA Earnings and Options Activity

Tesla is expected to report earnings after the close Wednesday, October 21. Third-party analysts are eyeing a consensus earnings estimate of $0.56 per share, on revenue of $8.26 billion—about 31% higher than quarterly revenue from a year ago.

The options market has priced in an expected share price move of 6.8% in either direction around the earnings release, according to the Market Maker Move™ indicator on the thinkorswim® platform.

Looking at the Oct 23 options expiration, puts have been active at the 400, 410, and 420 strikes, but higher concentrations have been seen to the upside, with heavy call volume at the 450 and 500 strikes. The implied volatility sits at the 29th percentile as of Tuesday morning.

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation, to sell the underlying security at a predetermined price over a set period of time.

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Key Takeaways

  • Tesla delivered a record 139,300 vehicles during the third quarter
  • Analysts expecting a fifth consecutive quarter of profitability
  • Battery Day disappoints investors during a volatile third quarter for TSLA stock

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