Tesla (TSLA) is set to release its 4Q22 earnings after the close, with a conference call scheduled for 5:30 p.m. ET. The earnings report is expected to be posted on Tesla's Investor Relations website at around 4:05 p.m., followed by a press release.

Analysts expect EPS and revenue of $1.11 and $24.3 billion respectively. This represents a 56% decrease in EPS and a 37% increase in revenue compared to the same quarter last year.

TSLA's Q4 deliveries of 405,000 missed the mark. Similar to Q3, TSLA produced more cars than it delivered, adding to investor concerns. TSLA explained that the difference was not due to lack of demand, but rather their transition towards a more even regional distribution of vehicle builds to deal with the increasing difficulty of securing transportation at a reasonable cost.

With TSLA increasing discounts, there is a risk that a decrease in average selling prices will accelerate the erosion of their automotive gross margin. This concern was amplified when the Wall Street Journal reported on January 13th that TSLA reduced prices in the US by up to 20% on some vehicles.

Last quarter, the automotive gross margin decreased by 260 bps year-over-year to 27.9%, partly due to increased production at TSLA's Austin, TX and Berlin, Germany plants. These plants do not have the same economies of scale as TSLA's Shanghai and Fremont, CA plants, resulting in lower margins.

Attention will also be focused on TSLA's outlook. Elon has maintained its guidance of "achieving 50% average annual growth in vehicle deliveries over a multi-year horizon", but they did not meet this target in 2022 as deliveries grew by 40% to 1.31 million.

TSLA “investors” (basically Ross Gerber and Cathie Wood) hope that the company’s aggressive price cut strategy will result in a significant increase in sales and deliveries. There are early indications that this strategy is working, with Electrek reporting on January 17th that TSLA is experiencing record demand in response to their price cuts.

The bears, however, have some meat on the bone with the announcement yesterday that Tesla plans to invest over $3.6 billion to expand their Gigafactory Nevada, which will produce their Semi truck. The argument here is “Why leak a headline ahead of earnings if the report is good?” We’ll see.

TECHS:

In 2022, TSLA's stock had a significant drop, with shares falling by around 65%. December was especially challenging for the company as demand concerns grew as they began reducing prices in China and the US.

Since the start of 2023, TSLA's stock has risen by about 16% year-to-date. That said, the stock slid before it rallied and shares are up nearly 43% in a straight line.

Lastly, TSLA still has a “high valuation” with a forward P/E of around 28x. This, however, is down significantly from last September when the stock had a forward P/E of 45x.

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