Tesla (NASDAQ:TSLA) investors are getting ready for an important catalyst. After markets close today, the electric vehicle (EV) leader will report earnings for the second quarter of 2022. And while TLSA stock has been rising today on anticipation, Wall Street expects the company to report disappointing earnings.
It’s been a difficult season since TSLA skyrocketed past $1,000 per share just a few months ago. And while it’s true that production setbacks and supply chair constraints have compelled analysts to slash their price targets, investors shouldn’t be worried. TSLA stock can come roaring back in the coming months.
What Q2 Earnings Mean for TSLA Stock
Investors are already bracing for the inevitable. When Tesla reports earnings that don’t show clear growth, shares will fall. If anyone had any doubts that Tesla’s Q2 earnings would fall short, the company’s quarterly deliveries report should have quieted them. Despite reaching the “line in the sand” that Wedbush analyst Dan Ives said it needed to reach to satisfy Wall Street, TSLA reported the first decline in deliveries in several years.
Adding to the mix are the multiple production shutdowns that have hindered Tesla’s progress. The government-induced shutdowns that plagued Shanghai in April pushed TSLA stock down as production stalled. Fast Company reports that “according to some analyst estimates, each day of the shutdown could have cost Tesla 2,000 to 3,000 units of lost production, totaling up to 63,000 cars that were never delivered.”
Experts worried about what that meant for Q2 earnings, but Tesla still had more roadblocks to face. In early July, it paused production in both Shanghai and Berlin despite reaching new production records during the previous month. Shortly before halting production, Elon Musk referred to the Berlin and Austin gigafactories as “gigantic money furnaces.” It is hard not to remember those harsh words, as well as his “super bad feeling” about the economy.
Until Tesla reports earnings, it will be difficult to asses the severity of the effect of the factory shutdowns. But even if the report pushes TSLA stock down, investors have plenty of reason to be optimistic.
The Road Ahead
Multiple experts have indicated they foresee growth in Tesla’s future. Goldman Sachs recently stated, “We believe that the record production in June is a sign that Shanghai is ramping back up well and that the company made progress recently at its Berlin and Austin factories.”
Wall Street has more reason to expect Tesla to continue scaling production. The company has filed with the city of Austin to expand its Texas gigafactory with the goal of building more assembly lines. While no permit has been granted, Musk is clearly intent on pressing forward in the face of negative market momentum. InvestorPlace’s Louis Navellier recently described the problems facing Tesla as “temporary in nature.” Further elaborating, he stated:
“They’re not anything that will impact the company’s long-term prospects. There may be concern that demand could take a hit in an economic slowdown. So far, though, falling demand hasn’t been an issue. What has hurt Tesla’s operating performance are issues with meeting this demand.”
That’s certainly true, but if Tesla continues its efforts to scale production, it won’t have trouble meeting demand. Additionally, Navellier is right that EV demand isn’t falling. The Q2 earnings will reflect a difficult quarter, but they won’t mean TSLA stock can’t come roaring back.
On the date of publication, Samuel O’Brient did not hold (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.
