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All eyes will turn to Tesla (TSLA) on Wednesday as the FANGT sector looks to reestablish its leadership role in the overall health of the stock market. So far, fallen angel Netflix (NFLX) has kept up its side of the bargain with strong subscriber numbers seeing the stock rocket by up to 14% in Tuesday's afterhours session. Some worrying rumors have been circulating about Apple (AAPL) cutting iPhone production numbers, so we will have to bide our time there. Tesla has already perhaps gotten some bad news out of the way when it fell sharply following the release of delivery numbers earlier this month.
Deliveries for Q3 fell short of what analysts had been expecting – 343,830 versus 358,000 expected. Tesla also produced 365,923, so the reduced delivery numbers raised some concerns among investors. Tesla's stock price immediately fell just under 9% the next trading session and has been under constant selling pressure since. For Q3 earnings, the expectation is for EPS to hit $1.01 and revenue to come in at $22 billion.
Elon Musk has apparently confirmed on Twitter he will attend the conference call. Investors will be looking for a range of clues for future performance. FX headwinds are a thorn for all US-based globalized companies, and if not hedged FX headwinds are posing significant challenges. Updates about the demand profile in China are also crucial as this is an increasingly important market for Tesla.
Given the already sharp sell-off following delivery news, it would appear to slant the risk-reward slightly to the upside in my view. Elon Musk is always upbeat and is likely to remain so. Whether this is enough to fend off some of the doubters remains to be seen. Wall Street remains of a similar view despite some concern over these delivery numbers. Morgan Stanley had said that Tesla was looking at demand destruction, but Citi and Wedbush remain positive on the prospects post-earnings.
The key support at $207 has again been held, and that level becomes key. If Tesla breaks lower, then it will likely test the lower end of the trend support and 200-week moving average at $160. Already we see both the Relative Strength Index (RSI) and Stochastic showing a modest oversold signal. Holding $207 can see Tesla test $254 reasonably quickly as trend-following and some short covering pushes the move higher.
Tesla (TSLA) stock daily
