Tesla’s stock may get a post earnings jolt this week

Die-hard Tesla investors could possibly be forgiven for wondering why the thrill of owning the iconic car maker’s stock has seemingly disappeared.

In the end, since catapulting over 700 % last year, the shares have barely eked out a 3.4 % advance in 2021. Meme stocks like GameStop have pushed Tesla out of your limelight, while Bitcoin has attracted virtually all the buzz.

But the electric-vehicle juggernaut’s first-quarter results on Monday could possibly be just the thing to improve all that.

Since reporting surprisingly strong deliveries for the first 90 days of the entire year, expectations are running high. And Tesla must also convince investors it could store its lead in the EV market in an increasingly crowded playing field. As a result, traders are pricing in a jolt to the shares. Options pricing suggests Tesla’s stock may fluctuate 7.2 % in either direction, which will be the major post-earnings move since January this past year.

“We acknowledge Tesla has shaken up the auto industry, but recent commitments and advancements from incumbent auto makers such as Volkswagen and General Motors advise to us that Tesla has achieved peak market share within the EV category,” Jeffrey Osborne, an analyst at Cowen, wrote in an email earlier this month.

Legacy auto makers in america and Europe have announced ambitious plans this season to enter the EV race, ranging from everyday sedans to SUVs and luxury supercars. Even though billionaire Elon Musk’s company has a significant edge over its rivals when it comes to technology, software and brand awareness, its position could commence to erode fast as more rivals join the fray.

“Tesla sees itself as the apex player through the most formative phase of the industrialisation of sustainable propulsion and transition off of fossil fuels,” Adam Jonas, an analyst at Morgan Stanley, wrote in a note on Thursday. He added the business would have to address issues surrounding sustainably sourced battery manufacturing and offer chain.

The immediate priority is to expand capacity and get started “industrialising the ‘Tesla hegemony’ prior to the market gets a lot more crowded”, Mr Jonas wrote.

Investors may also be wanting to get more details on Tesla’s plants in Germany and Austin, Texas, in addition to any clues how demand because of its cars is shaping up this year. Tesla hasn't provided a delivery target for 2021, though it has hinted at a range of about 750,000 units.

There’s also the chance that as more traditional auto makers produce EVs, they’ll have to buy fewer regulatory credits from Tesla to remain compliant with emissions rules. That could eat right into a way to obtain Tesla’s revenue, which, while small, has tended to disproportionately bolster profits since there are no costs associated with them.

“Even in its first profitable year of 2020, adjusted pre-tax income was significantly less than the wages from selling credits to auto makers that can’t build pickups and SUVs fast enough,” Bloomberg Intelligence analyst Kevin Tynan said. “The irony is that despite all of the EV hype, legacy auto makers are making so much money from selling internal combustion pickup trucks and SUVs that it has made Tesla look profitable.”

Overarching issues aside, the recent fatal crash of a Model S car in Texas is also bound to get some airtime on the earnings call, as analysts make an effort to dissect why the accident happened and if the company’s driver assistance system, called AutoPilot, was involved with any way.