Tesla Pre-earnings Analysis


Tesla Pre-earnings Analysis

Tesla investors are eagerly anticipating the company’s first earnings report of 2025 (Q4 2024 results), which is set to be released later this week. The stakes are high, as Tesla’s previous earnings announcement triggered a 30% surge in its stock price, followed by a months-long rally that more than doubled its value. With such a strong precedent, expectations are elevated, and Tesla faces significant pressure to deliver strong results. Failing to meet these expectations could lead to a reversal of recent gains.

This earnings release comes at a unique time for Tesla. The company has been benefiting from its recent financial performance and political dynamics. Elon Musk’s relationship with newly re-elected President Trump has generally been seen as an advantage for Tesla. However, this relationship has been called into question after President Trump announced plans to revoke the EV mandate and federal tax credits for electric vehicles. While these political factors are noteworthy, the ultimate driver of Tesla’s stock price will be its financial performance.

One area of concern for investors is Tesla’s recent vehicle delivery numbers, which fell short of expectations earlier this year. That announcement caused the stock to dip, and Tesla has struggled to regain bullish momentum since. Now, all eyes are on the earnings report, which will likely dictate the stock’s next move. Tesla has missed earnings expectations in three of the last four quarters, prompting caution and some profit-taking by investors ahead of the announcement.

Tesla’s delivery numbers remain impressive, so revenue is expected to be strong. However, the key focus will be on profit margins, which posed a challenge during the first half of 2024. While margins improved significantly in the third quarter—leading to the previous rally—analysts expect a lower earnings-per-share figure this time around. This raises questions about Tesla’s valuation. 

At a market capitalization of $1.3 trillion and a price-to-earnings ratio of 113x, Tesla will need to quadruple its earnings per share over the next 12 months to justify its current valuation. If the company’s guidance does not indicate significant growth, the stock could face further downward pressure. Investors are watching closely to see whether Tesla can deliver the results needed to sustain its lofty valuation or if a correction is on the horizon.

Option chain analysis:

Tesla’s option chain currently reflects approximately 114% implied volatility for this week’s contracts, indicating an expected move of around (+/-) $37. However, the direction of the move remains uncertain. This means that if Tesla fails to meet the expected price movement, many out-of-the-money (OTM) contracts could lose all their value. We’ve identified key resistance and support levels where TSLA may move following the earnings report.