Tesla Q1 Earnings Preview: Sales, Profit To Grow On Record-Breaking Deliveries

Long-term Tesla (NASDAQ:TSLA) bulls haven’t had much to complain about lately. The world’s largest electric vehicle (EV) maker is coping with worldwide supply chain disruptions much better than its rivals, meeting soaring global demand for its cars.

As a result, the Elon Musk-owned EV maker gained 18.1% during the past six months, while the broader NASDAQ 100 Index shed around 7%. TSLA closed Tuesday at $1,028.15.

TSLA Weekly Chart

This strength will likely continue when the Austin, Texas-based manufacturer reports its first quarter earnings this evening.

Analysts expect sales to jump about 70% in the quarter that ended on Mar. 31 compared with the same period a year ago. Profit per share may also see a massive expansion, surging about 130% in the same period.

These projections clearly show that, unlike automotive peers, Tesla is better prepared to deal with manufacturing challenges, first brought by the pandemic and then the war in Ukraine.

Tesla was able to report record first quarter deliveries earlier this month despite “an exceptionally difficult” period marked by recurring disruptions, especially the shutdown of its Shanghai factory.

This superior performance results from Tesla’s smart deals to secure essential raw materials and vertical integration supplies.

In January, the EV giant agreed to purchase 75,000 metric tons of nickel concentrate, a vital ingredient for electric vehicle batteries.

The deal comes less than six months after a similar nickel supply agreement with Melbourne, Australia-based mining company BHP Group. Tesla also has a multi-year supply agreement for nickel with Rio De Janeiro-based Vale S.A., Bloomberg News reported last month.

Favorable Fundamentals

Tesla’s lead in the EV market and the global shift to clean technologies prompted many analysts to upgrade its stock recently.

Credit Suisse said it sees “favorable fundamentals” heading into the company’s earnings, raising its price target to $1,125 from $1,025. Its note says:

“We raise our target multiples given the increased strategic importance of Tesla as a leader in the global EV transition; we maintain our Outperform rating, with Tesla to benefit from favorable fundamentals in the coming years as outlined in our recent upgrade.”

However, the investment bank noted that it was watching for any impact of the COVID situation in China, where production at Tesla’s Gigafactory remains halted due to a lockdown in Shanghai.

Furthermore, Tesla has successively beaten analyst estimates in its earnings reports.

However, despite these bullish calls, investors must also remember that Tesla is a highly volatile stock, making it hard to predict its next move. While the company undoubtedly dominates the electric vehicle market, its stock trades at extremely elevated multiples.

According to InvestingPro analysis, Tesla stock is trading at a 12-month price-to-earnings multiple of 190, a level that has set the performance bar so high that there is no space for the carmaker to make any error when it comes to financial performance.

Due to this extremely rich valuation, Tesla’s stock could be a risky bet based on InvestingPro’s model, which assigns $814.08 as a fair average value for TSLA shares.

TSLA Fair Value Estimates

Source: InvestingPro

That's a 20.8% downside risk from the current level.