Last week, Tesla (NASDAQ:TSLA) investors were holding their breath as the automaker was due to report earnings. Luckily for them, the company beat on earnings and revenue expectations. At one point, TSLA stock rallied almost 12% in response to the report. However, due to the increased market-wide volatility, the stock has struggled since.
Will strong deliveries and better-than-expected earnings be enough to keep Tesla out of a bear market? Well, that answer isn’t quite as simple.
The quarter was impressive, with Tesla generating $3.3 billion in GAAP net income — something the bears never thought they’d see. Meanwhile, the company’s operating margins skyrocketed up to 19.2%. That’s up significantly from last quarter’s 14.7%. Excluding regulatory credits, automotive gross margin was more than 30% — up from last quarter’s 29.2% — and ahead of consensus expectations of 27.7%.
We already knew deliveries had been going well thanks to Tesla’s monthly updates. However, in Q1 the company produced about 305,400 vehicles and delivered about 310,000, up 69% and 68% year-over-year, respectively.
In all, there were a lot of good things in the quarter and Tesla is clearly doing well. Aside from opening its new factories in Germany and Texas, Tesla also restarted production in its Shanghai Gigafactory. Keep in mind it’s the company’s most productive plant.
Fundamentally, Tesla has the momentum to avoid a bear market. Notice how other electric vehicle (EV) stocks — like Nio (NYSE:NIO), Lucid Motors (NASDAQ:LCID) and Rivian (NASDAQ:RIVN) — have been crushed. However, TSLA stock has held up.
That said, sometimes the fundamentals alone aren’t enough to keep even the best stocks out of bear market territory.
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For now, TSLA stock is doing a great job holding the pre-earnings support level at $975. If that fails, it opens the door down to the $945 area. This level was prior resistance in February and also where the 50-day comes into play. To see former resistance turn to support would be bullish.
For a growth stock, Tesla is holding up quite well. That’s particularly the case with the Nasdaq near its year-to-date low and most growth stocks in the dumpster. If Tesla can continue to outperform the markets, it may roar higher when the bulls eventually take over.
However, if the stock begins to lose key support, it too is susceptible to more selling pressure. Below $940 opens the door to $900, then $870 to $875. Below that and $800 is in play, along with 2020 lows.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
