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Tesla (TSLA) Q1 Deliveries: What to Expect

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Shares of Tesla (TSLA) have fallen some 30% year to date, grossly trailing the 10% rise in the S&P 500 index. Over the past six months, the stock has fallen 28% while the S&P 500 has returned 22%. And since the electric vehicle maker reported its fourth quarter earnings on January 24, TSLA stock has given up as much as 22%, falling to a low of $160.

But the stock has become too cheap to ignore. An argument can be made that Tesla shares, which have fallen almost 13% over the past month, and still some 40% below their 52-week high of $299, have already reached the oversold level. Ahead of the company’s Q1 vehicle deliveries report, which is due out Tuesday, for investors who are waiting for the dust to settle, there are still plenty of reasons to expect Tesla stock to march higher.

To be sure, the deliveries report holds significant weight in the ongoing bull versus bear debate surrounding the electric vehicle giant. Recent setbacks, including the temporary closure of Tesla's Model Y factory near Berlin due to an arson attack, coupled with subdued demand in China during the Chinese New Year holiday, could adversely impact the delivery total. Consensus estimates for Q1 deliveries have fallen about 14% from 494,000 a few months ago to a current projection of 425,000.

For comparison, Tesla delivered 484,507 vehicles in Q4 and 422,875 vehicles in Q1 of the previous year. So, even amid the bearish sentiment among analysts, 425,000 would still represent 12% decline sequentially and 0.5% rise year over year. The question is whether the consensus estimate may still be overly optimistic. Meanwhile, Q2 deliveries are projected to be 4512,000 vehicles. Analysts at Goldman Sachs cited declines in Tesla app downloads in the U.S. and Europe compared to the previous quarter and year.

While the forecast may point to a level of pessimism that Tesla might disappoint, the numbers are nonetheless low enough for Tesla to meet or exceed. Tesla’s price cuts on vehicles could have translated to increased sales volume. Conversely, the price cuts could impact Tesla’s margins, which is another area to keep an eye on. And this is where CEO Elon Musk must up-sell the need for patience to allow Tesla time to navigate through these challenges, particularly at its factories.

Without question Tesla is going through a low point in its fundamental levels. But when looking two to three years out, there are potential growth catalysts such as autonomous taxi networks, the continued buildout of the Full Self-Driving (FSD) platform, which should reaccelerate not only growth, but also margin expansion. The company is betting heavily on FSD, which will be the birth of the autonomous vehicle revolution and is designed to automate Tesla vehicles so they can operate without a driver behind the wheel.

Once FSD can navigate autonomously, it will not only boost Tesla’s profit margins, it will be a profit center of recurring revenues for Tesla through the company’s ambition for Robotaxis. To be sure, Tesla is not alone in this lull. Vehicle demand for EVs has struggled for much of the year due to, among other things, rising interest rates. Essentially, while the market is focused on the near-term headwinds revealed in the Q1 deliveries and earnings headwinds, there are still positives being ignored.

As such, with Tesla stock trading below where it stood both one year ago and two years ago, now is the time to bet on the stock to rebound in the next 12 to 18 months.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Richard Saintvilus

After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.

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