Tesla's results could be decisive for the rebound of its actions

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  • Present the results of Q4 of 2019 on Wednesday, January 29, after closing

  • Expectation of income: 6,950 million dollars

  • BPA Expectation: $ 1.64

Looking at the price of Tesla shares (NASDAQ: TSLA), it does not seem that the company will have a difficult time when announcing its fourth quarter results next Wednesday. Investors, who have boosted their actions over the past three months, are already convinced that the troubled electric car manufacturer is picking up.

After announcing in October an unexpected profit recorded in the third quarter, Tesla shares have been on a roll, rising 125% since then and closing yesterday for the third consecutive day at $ 561.24.


Behind this drastic rebound are the robust sales figures for cars in the last quarter, the announcement of the executive director Elon Musk that he will advance the launch of his next product, the Model Y crossover, and putting into operation his "gigafactory" of Shanghai in record time.

The company announced earlier this month that it delivered the record amount of 112,000 vehicles in the fourth quarter and has started production at a new factory near Shanghai, where it manufactures 1,000 Model 3 sedans a week.

The impact of this news has been so powerful that Tesla's valuation has exceeded $ 100,000 million for the first time, surpassing Volkswagen (DE: VOWG_p) (DE: VOWG), which sold almost 30 times more vehicles last year. Looking ahead to 4Q, analysts on average expect another profitable quarter with a rebound in sales at $ 6,950 million.

This twist of fate came after a very disturbing year for Tesla that shaken investor confidence in the founder of the company, Elon Musk, who helped shareholders with their plan - finally aborted - to privatize the company.

These missteps, along with a series of broken promises, forced many high-level analysts to lower the rating of Tesla's shares and even question the seriousness of Musk's mission to disrupt the traditional automotive industry.

China is an oscillating factor for Tesla

For the Tesla bulls, that ambitious goal suddenly seems within reach after the latest advances. The completion of the Shanghai factory and the company's success in overcoming its ambitious goal of selling 360,000 vehicles this year are a clear sign that Tesla could quickly become a significant industry player if it continues to meet its objectives.

Despite this optimism, it is not clear that China is going to quickly become a profitable destination for Tesla. Electric vehicle sales have weakened in recent quarters in China as the government has been reversing subsidies for alternative energy vehicles.

The slowdown in China's car market, the elimination of US tax credits for Tesla buyers and the risk that Musk will break his promises again are some of the main obstacles that could slow down the uptick of the shares in 2020. Vale It is worth remembering that the company had a similar strong end in 2018, but reported large losses for shareholders in the first half of 2019.

In order to consolidate its position, Tesla should demonstrate in the coming quarters that it can translate all these gains into a generation of consistent free cash flow and start reducing its debt. But the problem with the company's actions is that it reacts too wildly to any bad news, making it a favorite target for speculators.

Despite the sharp rise in shares this year, Wall Street is still divided in terms of Tesla's forecasts. Although at least eight analysts have raised their price target by more than $ 100 since the beginning of the year, according to Bloomberg data, the consensus remains well below where Tesla's shares are located. The average target is $ 363.92 and only 10 analysts assign the purchase rating to the shares, compared to 10 waiting and 16 selling.

In conclusion

There is no doubt that Tesla has led its way after increasing its production and building a factory in China that could be decisive for the company's long-term profitability.

But the pioneer car manufacturer needs to demonstrate quickly that all these achievements are helping the company achieve sustainable profitability and that the good times are here to stay, unlike many of its previous boom and bust cycles. The results of next week could be decisive for the rebound of Tesla

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