One could forgive the die-hard investors of Tesla Inc. for wondering why the fun of owning the automaker’s iconic stock has seemingly gone.
After all, since they catapulted over 700% last year, stocks have barely advanced 3.4% in 2021. Stocks like GameStop have pushed Tesla out of the limelight, while Bitcoin attracted almost all of the buzz.
But the electric vehicle juggernaut’s first quarter results on Monday could change all that.
Since the publication of surprisingly strong deliveries for the first three months of the year, expectations have been high. And Tesla must also convince investors that it can maintain its lead in the electric vehicle market in an increasingly crowded playing field. As a result, traders price the stocks in a jerk. The option price suggests Tesla’s stock could move 7.2% in either direction, which would be the biggest post-profit move since January of last year.
“We recognize that Tesla has rocked the auto industry, but recent commitments and progress from incumbent automakers such as Volkswagen and General Motors suggest that Tesla has reached maximum market share in the electric vehicle category,” wrote Jeffrey Osborne, Cowen Analyst. in a note earlier this month.
Legacy automakers in the US and Europe have announced ambitious plans this year to participate in the race of electric vehicles, ranging from everyday sedans to luxury SUVs and supercars. And while billionaire Elon Musk’s company has a significant edge over its competitors in terms of technology, software and brand awareness, its position could start to erode quickly as more rivals join in. to the scrum.
“Tesla sees itself as the main player in the most formative phase of the industrialization of sustainable propulsion and the shift away from fossil fuels,” Morgan Stanley analyst Adam Jonas wrote in a note Thursday. He added that the company is expected to address issues related to sustainable battery manufacturing and the sustainable supply chain.
The immediate priority is to increase capacity and start “industrializing Tesla’s hegemony” before the market gets even more congested, “Jonas wrote.
Investors will also be eager for more details on Tesla’s factories in Germany and Austin, Texas, as well as clues as to how demand for its cars is changing this year. Tesla has not provided a delivery target for 2021, although it has hinted at a range of around 750,000 units.
There is also the risk that, as traditional automakers produce electric vehicles, they will have to buy fewer regulatory credits from Tesla to stay compliant with emissions rules. This could eat away at a source of Tesla’s revenue, which, while small, tends to disproportionately increase profits because there are no costs associated with them.
“Even in its first profitable year of 2020, adjusted pre-tax income was lower than income from selling credits to automakers who can’t build pickup trucks and SUVs fast enough,” said Kevin Tynan, analyst at Bloomberg Intelligence, in an interview. Despite all the hype about electric vehicles, traditional automakers are making so much money selling internal combustion vans and SUVs that Tesla seems profitable.
Major issues aside, the recent Fatal Model S car crash in Texas is also linked to getting some airtime on the earnings call, as analysts try to dissect why the accident happened and so the company’s driver assistance system, called AutoPilot, was involved in anyway.