For some investors, it’s all about earnings this week for Tesla (NASDAQ:TSLA). But for others, a nice cup holder on the price chart of TSLA stock is already suggesting it’s time for bulls to buckle up and buy shares today. Let me explain.
EV upstart Tesla is set to release its Q1 results after today’s close. Ahead of the report, Wall Street expects the company to report a loss of 18 cents. That would compare favorably to last year’s loss of $2.90 which absorbed some significant one-time charges.
TSLA sales are also forecast to jump year-over-year by $1.31 billion to $5.85 billion. But with record deliverables for Q1 already announced, Wedbush’s Dan Ives believes Wall Street’s focus will be on Tesla’s back half of 2020. The firm sees approximately 400,000 units as the new ‘bogey’ and down from 500,000.
To be sure there are a lot of moving parts when it comes to Tesla, and there’s always more too. Any update on China is important information. The country is the world’s largest EV market. And not terribly far off, next month’s already postponed Tesla Battery Day will rightfully have investors’ attention.
On Monday though, shares of Tesla jumped more than 10%. The trigger appears to have been a Bloomberg report released this past weekend indicating certain Tesla personnel were directed to report back to the company’s Fremont facility. The California plant had been shut down due to the novel coronavirus.
Alameda County health officials subsequently nixed the start date. But a second story out late Monday points at some production to resume on May 4. Despite the confusion and lack of visibility on Tesla’s business front, the price chart now finds bulls firmly in the driver’s seat.
TSLA Stock Daily Chart
At roughly 11% short interest, TSLA stock is far from the biggest short in percentage terms within the stock market. That honor goes to GameStop’s (NYSE:GME) roughly 90% of stock bet short.
Nor is Tesla in the same league as Peloton (NASDAQ:PTON) or Virgin Galactic (NYSE:SPCE) whose short interest rests in the low to mid 40’s. But Tesla does stand out in many other good ways.
Tesla’s $14 billion-plus in bearish bets against the company is the largest in terms of capitalization. And in of itself, 11% short interest isn’t an insignificant number either. Moreover and in our estimation, that’s fuel to drive shares higher as technically conditions just got a lot worse for those bearish players.
Aside from the week’s large gains Monday, Tesla staged a heavier and above-average volume breakout from a small and well-positioned handle consolidation within its larger cup-shaped corrective base. That’s bullish.
Coupled with stochastics signaling a bullish crossover in neutral territory, short interest and TSLA’s natural buyers of shares, there’s ammunition to propel the stock to new record highs. But that’s not all bulls have working in their favor.
There’s also Tesla’s earnings. Shares maintain a slight upside bias following its quarterly reports. The lifetime edge favors bullish investors as the stock has rallied 55% of the time over 38 earnings releases.
Working backward and over the past year, the aftermath has produced gains of 10.30%, 17.67% and losses of 13.61% and 4.26%.
The Bottom Line on TSLA Stock
Looking past this week’s quarterly confessional, I’d conservatively forecast a price target of $1000 for Tesla stock by late summer.
That’s based on a stew of information including the aforementioned earnings trends and price patterns that have taken shape. Other factors, like helpful short interest to assist a rally, a history of price momentum and a healthy market environment have helped Tesla run over bears failing to pay attention and willing to put themselves in harm’s way.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
