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Tesla Earnings Are Coming. They Better Be Good.

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A Tesla EV drives through the Las Vegas Convention Center Loop ahead of the 2022 Consumer Electronics Show held in Las Vegas this month.
Patrick T. Fallon/AFP via Getty Images

Trading in Tesla stock recently has been wild. It’s about to get wilder as the electric vehicle company is due to report fourth- quarter earnings after the close of trading Wednesday.

Tesla (ticker: TSLA) bulls will expect a big earnings beat. They also will want to hear good news from CEO Elon Musk.

For the fourth quarter, Wall Street is expecting earnings of about $2.33 a share from sales of $17.1 billion. Those numbers are the starting point for what Tesla has to do better than on Wednesday.

Those numbers have been creeping higher since the company smashed delivery expectations. Tesla delivered more than 308,000 vehicles in the fourth quarter. Wall Street projected closer to 270,000 units being sold.

The fourth-quarter consensus earnings estimate was about $1.94 a share in late December, before the big delivery numbers were released. The highest earnings estimates back then were about $2.60 a share, according to FactSet. Now the highest estimate is about $3 a share.

It might take something close to the high estimate of $3 to boost the stock. Tesla reported third-quarter earnings of $1.86 a share, which was better than the consensus estimate of $1.62 and close to the highest estimates of about $1.95 a share.

The third-quarter earnings beat drove Tesla stock up 3.3% on a day the S&P 500 rose about 0.3% and the Dow Jones Industrial Average traded flat.

Exactly what it will take this time to move the stock higher, or lower, is really anyone’s guess. The stock has been very volatile lately. Shares shot up 13.5% after delivery results, but have now fallen about 14% year to date. Fears of inflation, rising interest rates and a potential economic slowdown have hammered shares of richly valued technology stocks, Tesla included.

Down 14% isn’t all that bad. The Nasdaq Composite is down about 14% year to date too and Tesla stock tends to be a little more volatile than the market.

Options markets imply that Tesla stock will move more than 10%, up or down, following earnings. That reflects all the current uncertainty in the market. Tesla shares have moved up or down an average of about 3.5% the day following the past four quarterly reports.

Earnings will matter, but they won’t be the only thing that moves Tesla stock Wednesday evening and Thursday morning. Musk is due to be on the company’s quarterly conference call. Musk stopped his regular participation on conference calls in mid-2021 and missed the third-quarter call.

Musk is there to deliver a product update. That could mean an update on timing of the Cybertruck, or it could mean outlining plans for a new, lower-priced EV model which will expand Tesla’s product lineup into other vehicle segments. A new model or the Cybertruck arriving on roads in late 2022 would be considered good news.

Musk might also talk about the startup of new capacity in Germany and Texas. Wedbush analyst Dan Ives believes the production ramp-up will be key for the stock in coming months. Those two new plants are expected to produce a few hundred thousand vehicles combined in 2022.

“Expanded production is one thing, but it doesn’t mean anything without demand,” wrote RBC analyst Joe Spak in his report that previewed earnings. He doesn’t see a demand shortfall for EVs in 2022, though, and agrees with Ives that 2022 will be all about more production for Tesla stock.

Musk might also talk about new batteries for his EVs. Tesla is adopting larger battery cells, believing they will lower costs and improve vehicle performance. Exactly when the larger cells will go into vehicles isn’t known.

There will be a lot to watch for Wednesday. Recent market volatility just adds to the drama of a Tesla earnings report.

Write to Al Root at allen.root@dowjones.com

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