Prediction: This Is How Tesla Stock Will Do After July 22
Key Points
Tesla's recent quarterly delivery numbers suggest its upcoming Q2 results should be strong.
The stock, however, normally hasn't soared after earnings in recent years.
Its valuation remains incredibly high.
The recent public offering of Space Exploration Technologies, also known as SpaceX, has given Elon Musk fans another investment option to consider, as Tesla (NASDAQ: TSLA) now has to share the spotlight. And at a market cap of around $1.5 trillion, it is firmly behind the rocket company, whose valuation was north of $1.9 trillion as of the end of last week.
Tesla's stock is down close to 10% for the year, and a big test for it could be how it does in its upcoming earnings report. Its latest quarterly earnings numbers are set to come out on July 22. Could they give the stock the boost that it desperately needs? Here's what I think will happen.
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The company is likely to show some decent growth on both top and bottom lines
When Tesla last reported earnings, its growth rate was impressive at 16%. The company has reduced prices as it looks to fend off competition, and its revenue totaled $22.4 billion during the first three months of the year, versus $19.3 billion a year ago. Earnings were up by 17%, but they weren't as strong as they had been in prior years.
Ultimately, I expect a similar story to play out in the second quarter, particularly with Tesla recently reporting stronger-than-expected delivery numbers. Growth is likely to be high and better than expected. And with the company going up against soft earnings numbers, it may very well produce some strong results on the bottom line as well. All in all, the results may look strong.
Why Tesla's stock may still be destined to fall
In recent years, it's been more common to see Tesla's stock fall after earnings rather than for it to skyrocket.
It's not just about how the company has performed over the past quarter, but also about its guidance and outlook for the future. What complicates things now is that Musk fans have another option: SpaceX. If Tesla's outlook doesn't look as promising, which may very well be the case, as it isn't in the business of making rockets or investing heavily in artificial intelligence, it may simply fall out of favor with investors.
The lack of excitement around Tesla's recent delivery numbers may very well be proof of that. And that's also why I believe even though the company may have some decent numbers in Q2, that may not be enough to get investors excited about a stock that trades at nearly 400 times its trailing earnings.
Tesla continues to be an overvalued stock, which is why I wouldn't be surprised to see it fall after it reports its latest numbers, as expectations are likely to be high.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.