Tesla stock poised for higher opening after unexpected Q2 profits

Tesla shares rose over 4% in after-hours trading on Wednesday, after posting a fourth straight quarter of net profits.

Tesla share price: What’s the latest post-earnings?

US electric car maker Tesla's (NASDAQ: TSLA) shares rose as much as 4.4% in after-market trading on Wednesday 22 July, after it reported a fourth consecutive quarter of profits.

These latest results mean Tesla has achieved its first full year of profitability on a GAAP (standard accounting) basis. Thanks to that, the company can now be considered for inclusion on the S&P 500 index from as early as September, according to the index’s listing rules.

Tesla shares closed at US$1,656.50 each on Wednesday. IG’s market analysis show that ‘buys’ formed 52% of all trades on the Tesla counter for the day, indicating an expectation for a price increase.

Tesla posts better-than-expected revenue

Tesla – which overtook Toyota Motor Corp as the most valuable US automobile company earlier this month – posted a net income (GAAP) of US$104 million in the quarter ended 30 June 2020.

Total revenue came in at US$6.04 billion, versus Refinitiv analyst estimates of US$5.37 billion. However, on a year-on-year basis, revenue is down by 5%.

Earnings per share (non-GAAP) hit US$0.0218 per share, versus Wall Street expectations of US$0.03. This is up 91% from the previous quarter.

Automotive revenue, however, fell 4% year-on-year to US$5.18 billion despite higher vehicle deliveries, regulatory credit revenue, and energy generation and storage revenue.

The company said this was due to lower vehicle average selling price (ASP) and lower services and other revenue.

Total deliveries for the quarter was 3% higher quarter-on-quarter at nearly 91,000 units.

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What’s the outlook for Tesla for the rest of 2020?

Despite the lower sale price of its cars, Tesla founder and CEO Elon Musk said during the earnings conference call that he is still unsatisfied with how expensive Tesla cars are.

‘The thing that bugs me most right now is that our cars are not affordable enough, we need to fix that,’ said Musk. ‘I think we just want to be like slightly profitable and maximize growth and make the cars as affordable as possible.’

In terms of production sites, Musk also revealed that the next US Gigafactory will be in Austin, Texas. He said that the new factory would manufacture Model 3 and Model Y vehicles, as well as a new semi-truck called the Tesla Semi (slated for 2021 delivery) and the much-hyped state-of-the-art Cybertruck.

Meanwhile, the company says it is continuing to build capacity for Model Y at Gigafactory Berlin and Gigafactory Shanghai, and that deliveries from both locations are still on track to begin in 2021.

It is also installing additional machinery at the Fremont Factory in the US, which is expected to increase total Model 3 / Model Y capacity from 400,000 to 500,000 units per year.

Despite production interruptions this year due to the Covid-19 pandemic, Tesla says it is still targeting to deliver half a million vehicles by the end of 2020.

Tesla share price: Where next?

In terms of share price, IG market analyst Monte Safieddine wrote recently that the technical overview for Tesla remains volatile, with its main technical indicators flashing green and an average directional movement index (ADX) showing an ongoing propensity to trend.

‘That means contrary to the classic buy vs. sell mentality in approaching a stock, strategies that conform to the current overview should it persist would be breakout strategies anticipating a break/breach of its key pivot points (to the upside or downside),’ he wrote.

The stock currently has a consensus rating of ‘hold’ from 31 investment analysts polled by FactSet.

Tesla’s share price is up 280% year-to-date.

How to trade the Tesla stock with IG

Are you feeling bullish or bearish on Tesla shares? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Tesla Motors Inc> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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