Tesla (NASDAQ:TSLA) will report fourth-quarter earnings on Jan. 25 after the market closes. For the period, analysts expect net income between $1.13 and $1.15 per share of TSLA stock on revenue of $24.24 billion.
Earnings should distract from CEO Elon Musk’s court testimony about a tweet saying he had funding to take Tesla private in 2018. They will also indicate just how far Tesla is ahead of its electric vehicle (EV) rivals.
Here’s what investors should know moving forward.
TSLA Stock and the Tesla Lead
Bullish analysts like George Gianarikas of Canaccord Genuity are telling investors to buy TSLA stock ahead of earnings. Gianarikas says recent price cuts have stoked demand and that Tesla’s profits will grow as it charges for software updates.
Bulls note that the recent price cuts also bring some models below the $55,000 price threshold that makes them eligible for the latest tax credits. Half of Tesla’s Model 3 and Model Y cars now qualify. The cuts put prices below those for competing models from General Motors (NYSE:GM) and Ford (NYSE:F) as well.
According to the bulls, Tesla’s control of its sales and service channel, including the software updates, justify its premium stock price. This after-market dominance — which no gas-powered car company can match — makes Tesla more like Apple (NASDAQ:AAPL) than GM.
That said, bearish analysts like Gene Munster of Deepwater Asset Management say the bulls may be headed for a fall. Even if earnings come in as expected, the numbers are growing more slowly as Tesla scales production. The EV company has already warned that its 405,000 deliveries for Q4 are short of analyst estimates.
China also remains a question mark for Tesla. The price cuts seem to have boosted demand there, but production was cut last year by the country’s Covid-19 lockdowns. U.S. investors are also suspicious of corporate dependence on China, a concern that extends to Apple as well.
Finally, analysts are worried about Musk, who sold off TSLA stock to buy Twitter and remains distracted with running the social media platform. Elon Musk’s image has taken a hit. His December stock sales — which came before Tesla warned on deliveries — may trigger an insider trading probe.
What Happens Next?
Tesla’s battery production and scaled factories on three continents give it a solid lead over rivals, but all those rivals are now gunning for it. Tesla is worth more than Toyota (NYSE:TM), Volkswagen (OTCMKTS:VWAGY), GM, Ford and Stellantis (NYSE:STLA) put together.
For TSLA stock investors, the question remains: For how long?
On the date of publication, Dana Blankenhorn held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.