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Tesla Stock Earnings: Here's What Wall Street Expects

On January 26, it will be Tesla's turn to report fiscal fourth-quarter earnings results. Here's what analysts are saying ahead of the release.

The $1 trillion market-cap company Tesla  (TSLA) - Get Tesla Inc Report will report its fiscal fourth-quarter results after the closing bell on January 26. With the company already reporting record vehicle deliveries in quarter, as well as for full-year 2021, it's no surprise that Wall Street is bullish on Tesla.

However, should investors expect another rally after earnings?

Figure 1: Tesla Stock Earnings: Here's What Wall Street Expects

Figure 1: Tesla Stock Earnings: Here's What Wall Street Expects

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A Recap of Third-Quarter Earnings

In the company's most recent earnings report, released on October 20, 2021, Tesla easily beat both its earnings per share (EPS) and revenue estimates. As a result, the stock skyrocketed more than 40% through early November and pushed Tesla into a select group of companies with market caps above $1 trillion.

Tesla reported EPS of $1.86, which was 25 cents above Wall Street's expectations. And its third-quarter revenue of $13.76 billion beat the consensus estimate by $54.6 million. That marked a 56% increase, compared with the same period last year.

One of the key metrics that generated the most excitement in the markets was Tesla's delivery of 241,391 vehicles in the third quarter. This set a new record for the company and beat analysts' expectations.

According to Tesla’s management, the third quarter set records in several aspects, highlighting best-ever net income, operating profit, and gross profit.

Tesla's Fourth-Quarter Earnings Expectations

Management's forecast for the fourth quarter indicates that Tesla is focused on growing manufacturing capacity as fast as possible. The company aims to achieve 40% average annual growth in vehicle deliveries by ramping up production at its gigafactories in Berlin, Germany, and Austin, Texas.

On the cash and profit fronts, Tesla assures investors that it has sufficient liquidity to fund the product roadmap in line with its long-term capacity to grow production, with operating margins continuing to grow over time.

As announced by the company on January 2, in the fourth quarter, Tesla achieved production of more than 305,000 vehicles and deliveries of more than 308,000 vehicles — far beyond the 263,026 that experts were expecting. That makes the 2021 total of vehicles delivered more than 936,000.

So for fourth-quarter earnings, expectations are higher. Wall Street forecasts earnings per share of $2.35 and revenues of $16.65 billion, which indicates an increase in EPS estimates of 193% year-over-year and revenue estimates of more than 55% year-over-year.

Figure 2: Tesla's EPS surprise and estimates by quarter.

Figure 2: Tesla's EPS surprise and estimates by quarter.

What Wall Street Experts Are Saying Ahead of Earnings

The consensus among Wall Street is generally bullish. Tesla has been labeled a moderate buy and has an average price target of $1,057.39, implying an upside of 6% from current levels.

Listed below are some of the latest ratings provided by Wall Street experts:

  • With a hold recommendation on TSLA, and with a price target at $1,025, Credit Suisse analyst Dan Levy views Tesla's stock performance with skepticism based on four pillars: the acceleration of production capacity, the direction of gross profit margins, the introduction of new batteries, and new product announcements.
  • Bullish with a buy recommendation and forecasting a $1,300 price target, Piper Sandler analyst Alexander Potter highlights the 309,000 vehicles reported by the company in the fourth quarter above Wall Street's 270,000 forecast, indicating that more cars mean more earnings and that Tesla should earn $2.50 a share in Q4.
  • Jefferies analyst Philippe Houchois is another bull who recommends buying TSLA. He predicts a price target of $1,400. According to him, he sees Tesla as an EV leader ahead of its peers, growing rapidly and delivering vehicles above market estimates.
  • Dan Ives from Wedbush, is another convicted bull. With a buy recommendation and a $1,400 price target, the analyst sees the Austin and Berlin gigafactories, as well as lower operating costs, as key to Tesla's growth through 2022. He cites scaled battery technology as Tesla's differentiator against its competitors.
  • Pierre Farragu from New Street expects Tesla shares to "sustainably trade" in the 50-100 price-to-earnings valuation range. With a buy recommendation and a $1,580 price target, he predicts a "perfect storm" for TSLA in 2022 as production ramps up and gigafactories go online. This leads him to forecast a production run rate to over 1.8 million by the end of 2022 if chip shortages do not become a significant headwind.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)