Today is hump day, but any tuned-in market watcher will be ignoring camels and monitoring cars on this Wednesday. I’m senior reporter Phil Rosen, here to ring in a pivotal Tesla earnings report with you this morning.
While Elon Musk faces lawsuits in San Francisco for his infamous “funding secured” tweet, his net worth has skyrocketed nearly $11 billion this week.
But his wealth — and the wealth of his shareholders — could whipsaw today, depending on what comes across in a particularly important earnings report.
1. Everyone knows Tesla took a bludgeoning in 2022. But amid the bearishness (not to mention distractions from Twitter), Elon Musk’s car maker is still a favorite on Wall Street.
FactSet data shows that 64% of analysts give Tesla stock a “buy” or “overweight” rating. That’s the highest proportion since 2014. The median target price estimate for Tesla is $194 — which represents roughly a 25% upside from current levels.
For Wedbush’s Dan Ives, today marks one of the most important moments in Tesla’s history.
The stock has plenty of upside for 2023, but Ives believes it’s up to Musk to soothe investor fears over a few lingering issues. In his words:
“With all the worries about Musk’s attention on Twitter, selling Tesla stock, [naming] a new CEO, and other noise created by this ongoing soap opera… Elon needs to give investors comfort around this tight wire balancing act and reiterate his goals for the year and lay out the strategic vision despite a near-term dark macro.”
But some are more vocally bullish, and say now is the time to buy. George Gianarikas, analyst at Canaccord Genuity, said that investors should be snapping up shares ahead of the earnings announcement as a lot of the bad news is already reflected in the stock price.
“We think it had a lot to do with the demand situation impacting Tesla, first starting in China and later kind of leaking into other parts of the world, including the United States,” he told Yahoo Finance. “People know that. A lot of that seems to be priced into the stock.”
In recent weeks, the company has reduced prices on its Model 3 and Model Y units in China, the US, and Europe. To Gianarikas, the impact the move has on gross margins will be the biggest question of the day.
He also pointed out that prices have “come off the boil” for commodities used in building electric vehicles, which should be a boon for Tesla.
Meanwhile, strategist Gene Munster advised steering clear of Tesla. He expects downbeat earnings to drag on the stock, even as shares climbed earlier in the week.
“Part of this 8% move is anticipation and optimism that the 30% decrease in price for the Model Y is going to have an outsized impact on volume,” he said in a CNBC interview. “I expect that to be true — but there’s one piece that we don’t know, and this is about getting everyone on the same page. It’s the profit.”
And that could mean a downbeat response from the market.
Here’s what analysts are expecting today, according to Refinitiv:
Tesla’s profit margins will fall from 25.8% to 25.6%Tesla’s earnings per share will climb from $0.95 to $1.01 quarter-on-quarter
In other news:
Spencer Platt/Getty Images
2. US stock futures fall early Wednesday, after Microsoft earnings delivered a bleak outlook that added to investors’ worries about earnings growth. Meanwhile, Asian stocks rose to their highest level in seven months. Here are the latest market moves.
3. On the docket: Tesla, Boeing, and Levi’s, all reporting.
4. Goldman Sachs shared which cities it believes will suffer a 2008-size crash in home values. This year is going to be rocky in the property sector — here’s why the bank’s strategists expect home prices to fall further than they originally thought.
5. The bear market in stocks is on “thin ice,” according to Fundstrat’s Mark Newton. According to Newton, the consensus view is getting easier and easier to challenge. Newton said improving technical indicators suggest that a recession may not be that close after all.
6. A Washington DC townhouse with ties to Sam Bankman-Fried just went on the market for $3.28 million. It’s one of many properties that the crypto founder could offload as authorities seize his assets. According to reports, the townhouse hosted political gatherings with vegan-heavy menus.
7. Binance processed nearly $350 million in bitcoin for a little-known crypto exchange with ties to illicit Russian funds. A Reuters report connected the digital asset giant to Hong Kong-based Bitzlato, which was shut down by US authorities last week. Bitzlato has been called a “money laundering engine.”
8. Morningstar recommended buying these 10 cheap, high-quality stocks. Analysts said this batch of names pay a healthy dividend and can help offset losses during a time of slowing economic growth. See the full list.
9. Top real estate books, according to a financially-independent investor. He says he’s read over 30 real estate books — and his favorite one is from the 1950s.
10. The S&P 500 could crash 50% this year, according to legendary investor Jeremy Grantham. He warned that the bubble is entering its “final phase,” and investor confidence could be severely detained by housing markets rolling over, declining corporate profits, and a recession.