(Updated) Tesla Earnings Preview: TSLA stock gains after Q2 earnings beat

UPDATE: Tesla stock is up 2.6% in Thursday's premarket after walloping Wall Street's forecasts for the second quarter on Wednesday night. TSLA is trading around $762 at 5:30 AM EST. Despite the April shutdown at Tesla's Shanghai factory due to covid, the leader in EVs posted adjusted earnings per share of $2.27, which was 26% ahead of consensus of $1.80. Revenue of $16.93 billion was in line with the field of forecasts and advaned nearly 42% YoY. Gross margin for the auto segment fell five percentage points YoY to 27.9%, which appeared mostly a consequence of higher commodity prices. Free cash flow of $621 million was in line with the figure from a year ago but down from the $2.2 billion seen in the first quarter of 2022.

Tesla (TSLA) stock is running ahead in the premarket on Wednesday in anticipation that the electric vehicle leader will beat Wall Street forecasts for the second quarter that are currently pegged at $1.80 in adjusted earnings per share (EPS) and $16.92 billion in revenue. The automaker will release its Q2 results after Wednesday's session in what many are calling the most anticipated earnings call of the quarter. Thus far during the earnings season, which began last week, banks of media companies like Netflix have mostly beaten forecasts, so a beat would be in line with the market's optimism in the first half of this week.

Also read: Tesla Stock Deep Dive: Price target at $400 on China headwinds, margin compression, lower deliveries

Tesla earnings preview

Tesla has beaten revenue expectations for 10 straight quarters, as well as the last five on EPS. This quarter should be more difficult for the Elon Musk-led company as it began with lengthy shutdowns at its Shanghai factory due to the overhang from COVID-19. Of the 21 analysts altering their EPS forecasts for Q2 over the last 90 days, 17 of them have revised their TSLA figures downward. Wall Street originally forecast $2 billion in free cash flow for the second quarter, but analysts now have found consensus closer to half a billion dollars.

Wedbush Securities' Dan Ives, something of a Tesla bull, thinks that, despite the shutdowns in Shanghai in the early part of the year and slower production caused by tight supply chains in Austin and Berlin, Tesla can achieve its goal of raising deliveries by 50% for the full year. With 936,000 vehicles delivered in 2021, a 50% increase would require deliveries of 1.4 million. Tesla already announced that it delivered 254,695 vehicles in Q2 and produced 258,580 vehicles in Q1. To reach its 50% delivery increase, Tesla needs to produce somewhere close to 890,725 vehicles in the second half of the year. This would mean about 445,000 in both the third and fourth quarters – a heady goal to say the least.

One thing Tesla has going for it is that June was the highest production rate in the company's history. Deutsche Bank has already confirmed its bullish posture toward the EV producer, saying, unlike other automakers it has the ability to quickly ramp up production and delivery numbers. Higher run rates in the back half of the year at Berlin and Austin gigafactories make TSLA a fairly good bet for bulls, says Deutsche's Emmanuel Rosner.

Tesla chairwoman Robyn Denholm, an Australian herself, said that Tesla purchases in her home country are beginning to pick up. Australia currently only has about 26,500 Teslas on the road, about 1% of the company's overall fleet. 

A report from Electrek says that Tesla will report close to 71.5 MW of new residential solar installations in the US during Q2, which would be a new record.

Tesla is still expected to execute a 3-for-1 stock split sometime after its shareholder meeting on August 4. 

Tesla stock forecast

TSLA stock, as can be seen from the daily chart below, broke through a one-month wedge structure on June 7. Since then, it has not respected the top trend line whatsoever. In the event of an earnings beat, we think Tesla stock will easily surmount resistance at $760, which has stood in the way for more than a month. The Distribution/Accumulation line has been trending higher with price for the past month and recently eclipsed 3.76 billion. From there, Tesla share price would likely make a run at $780, which was the obstacle throughout May and into early June.

An earnings miss will send TSLA stock down to the bottom trend line of the wedge formation near $660. A severe miss could send it down as low as $620, near the low from May 24.

TSLA 1-day chart