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Pole position in the electric-vehicle business and a high valuation means Tesla Inc. needs to deliver a blowout quarter to reclaim its trillion-dollar market value. Picture: BLOOMBERG
Pole position in the electric-vehicle business and a high valuation means Tesla Inc. needs to deliver a blowout quarter to reclaim its trillion-dollar market value. Picture: BLOOMBERG

Pole position in the electric-vehicle business and a high valuation means Tesla needs to deliver a stellar quarter to reclaim its trillion-dollar market value.

Tesla’s estimate-beating production and delivery numbers have helped boost its projected revenue growth to 46% in 2022, a far cry from the 20% for General Motors and 15% for Ford. The problem is, even after the stock slumped 25% from its November record, Tesla’s dizzying market capitalisation of over $945bn is more than 10 times that of the 100-plus year old Detroit giants.

For Lindsey Bell, chief markets & money strategist at Ally Invest Securities, Tesla’s size only makes it more susceptible to violent market gyrations in an environment of rising interest rates. 

The broader meltdown in high-growth stocks, spurred by the Federal Reserve’s hawkish stance on monetary policy, adds to the headache for Tesla, which trades at 94 times forward earnings — among the 10 most expensive members of the S&P 500 Index. Moreover, the spectre of aggressive competition could hurt its pricing power as GM, Ford and new entrants such as Rivian Automotive roll out more electric vehicles.

“If 2022 ends up being a year of more cautiousness towards some of the historical star performers, it is difficult to see why Tesla won’t get caught up in that,” David Jones, chief market strategist at Capital.com, said in an interview. 

Even strong fourth-quarter numbers could go only so far in soothing investors’ nervousness about the stock, given its 27,000% run since Tesla went public in 2010. Tesla shares jumped as much as 4.2% on Wednesday in New York, ahead of the results after the market close. The stock had retreated nearly 15% in three prior sessions.

Wall Street analysts, in aggregate, see the stock going nowhere over the next year: the average price target tracked by Bloomberg is $953, an increase of 4% from Tuesday’s close.

For Wedbush’s Daniel Ives, who has a $1,400 price target, the focus on Wednesday’s earnings will be around commentary on deliveries in 2022, the shortage of semiconductors, when production will begin at new factories in Austin, Texas, and Berlin, and the company’s growth and profitability outlook for this year and beyond.

“We believe the emerging fundamental story at Tesla will be back in focus ... with current demand outstripping supply for Musk & Co. by roughly 30% globally based on our estimates,” he wrote in a note.

More stories like this are available on bloomberg.com

Bloomberg 

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