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Tesla Earnings Preview: China Demand To Drive Revenues Past $10 Billion

Tesla's record first quarter delivery total should lift revenues comfortably past $10 billion, but profit margins may be pressured by the global semiconductor shortage.

Tesla Inc.  (TSLA) - Get Tesla Inc. Report shares edged higher Monday ahead of a first-quarter earnings report that is expected to show a surge in group revenues but potentially pressured profit margins linked to the global semiconductor shortage.

Check out Eric Jhonsa's live blog of Tesla's earnings after the close.

Tesla is forecast to post a first-quarter bottom line of 79 cents per share, a two-and-a-half-fold increase from the same period last year, on a 72% surge in revenues to $10.3 billion when it reports after the close of trading today. 

Tesla delivered 184,800 new cars over the three months ended in March, the company reported on April 1, a record total that included the production of 180,338 Model 3s and Model Ys. 

China accounted for around 37.5% of that total, with the China Passenger Car Association (CPCA) showing the first-quarter tally of 69,280 units sold in the world's largest car market following the launch of its Shanghai gigafactory in 2019.

Gross margin pressures, however, linked in part to costs associated with meeting delivery targets and timings amid a global shortage in semiconductor supplies, could hit first-quarter profits, but Tesla has insisted it's less-susceptible to supply-chain impacts given that it designs many of its chips in-house and secures some of its supplies directly from foundries instead of outsourcing. 

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The sale of regulatory credits, however, which totaled $401 million over the three months ending in December, will add another boost to its bottom line.

Updates on the build-out of facilities in Berlin and Austin, which could come online later this year, will also be crucial for the stock's near-term performance as it makes the final transition into mass-production with the aim of delivering as many as 1 million cars this year. 

"Tesla’s successful transition to mass-market EVs and strong investments in battery manufacturing expertise and production capacity give us confidence they will attack and conquer another trillion-dollar market in energy generation and storage," said Canaccord Genuity analyst Jed Dorsheimer, who carries a $1,071 price target with a 'buy" rating on the stock. "Tesla is rapidly creating an Apple-esque ecosystem of energy products, harmonized in electrification, to become The Brand in energy storage."

Not everyone is a believer in the Tesla story, however, not its market value of $700 billion -- more than 2.5 times that of Toyota Motor Co TM -- given its modest delivery totals and uneven gross margins.

Tesla remains the most actively shorted stock on the S&P 500, according to data from S3 partners, with $35 billion in bets against it representing around 6% of the total float.

Tesla shares were marked 0.9% higher in late afternoon trading Monday to change hands at $736.20 each, a move that would nudge the stock into a 4% gain for the year.