Tesla shares may move 4.7% on earnings

Tesla is set to unveil its Q3 earnings after US markets close today (Wednesday, Oct 18th).

Earlier this month, the electric vehicle (EV) maker had already announced that it produced and delivered fewer vehicles than markets had expected for July-September period:

• Q3 Production: 430,488 vehicles (lower than market forecasts of 461,992)
   
• Q3 Deliveries: 435,059 vehicles (lower than market forecasts of 456,722)

With those lower-than-expected figures in mind, investors and traders now want to know not just the backward-looking Q3 figures, to assess the dent to Tesla’s current financial health, but also Tesla’s earnings outlook moving forward.

Tesla’s Q3 earnings: Key figures to watch

Here are the forecasts for some important items in Tesla’s upcoming earnings:

• Gross margin: 18%
   
• Earnings per share (EPS): 64c
   
• Revenue: $24.06 billion

There is a heightened focus on gross margin, in light of Tesla's series of price cuts.

If the forecasted 18% proves true, that would be Tesla’s lowest gross profit margin since the 14.5% number posted back in Q2 2019.

After all, Tesla has lowered prices on its vehicles in hopes of shoring up demand for its vehicles as economic woes put pressure on its customer base.

If Tesla’s profitability is squeezed into sub-18% territory, that could stoke concerns about Tesla’s near-term fortunes and potentially send the stock even lower.

After all, fundamental investors are driven by a company’s earnings outlook.

Note how Tesla’s shares’ record high above $400 was registered in November 2021, fuelled by the optimism leading up to its peak 29% gross margin reported for Q1 2022.

This stock is now trading at some 38% lower from that record high above $400 from some two years ago.

Potential Positives: Margins recovery? Cybertruck?

If Tesla CEO Elon Musk and new Chief Financial Officer Vaibhav Taneja can later today convince markets that Q3’s margin is the bottom amid these trying times, while pointing to a pathway of restoring margins back to 20%, that could help share prices recover.

Also, there’s still a lot of buzz surrounding Tesla’s Cybertruck, even though its mass production isn’t slated until next year.

Should Musk manage to stoke up enough fervor for this new vehicle, perhaps with details on when customers can expect the first Cybertrucks to be delivered, that may also be another positive catalyst for this stock.

Tesla’s earnings tend to produce stock volatility

Markets are also forecasting that Tesla’s shares could move 4.7%, either up or down, on Thursday, October 19th (the day when stock markets reopen after Tesla’s earnings release).

Over the past 10 years (since Q3 2012), this stock has moved 7.57% on average on the day after its earnings announcement.

Technical Analysis: Earnings set to break Tesla out of triangle pattern.

From a technical perspective, Tesla’s stocks have been squeezed into a symmetrical triangle.

Besides this narrowing trading pattern, this stock has also oscillated around the key 78.6% Fibonacci level from its year-to-date ascent in recent months.

Such price action suggests that Tesla’s shares have been left rudderless since plunging in the aftermath of its prior earnings release (Q2 2023 results were released on July 19th).

Traders would also note that this stock has also received crucial support from its 100-day simple moving average (SMA), with its 50-day counterpart stepping in more recently.

Positive takeaways from the upcoming earnings could invite Tesla bulls to push this stock:

• back above its 78.6% Fibonacci level at $257.03
   
• higher to test resistance around $266 at the upper downward trendline from the existing triangle formation.
  This would also mark a 4.7% move to the upside from current levels, as predicted.
   
• closer to last week’s cycle high at $268.92.

However, a souring earnings outlook may finally call time on the 50- and 100-day SMA’s role as crucial support levels, with a likely downside break of this triangle formation.

Potential immediate support may arrive at:

• $242: provided the forecasted 4.7% single-day move materialises to the downside,
   
• $234.59: late-September cycle low