Will Q2 Results Drive Tesla’s Share Price Even Higher?

Will Q2 Results Drive Tesla’s Share Price Even Higher?

CMC Markets  | Jul 22, 2020 06:01

To say there’s been a lot of movement in the Tesla share price in the last quarter is something of an understatement. The electric car manufacturer’s share price dropped to all-time lows of $350 in March, before recovering to a high just shy of $1,800 in early July. In May, even CEO Elon Musk claimed that the Tesla share price was too high. In terms of market capitalisation, the company is valued higher than well-established car manufacturers such as Toyota and Volkswagen, and the Tesla share price is up over 200% year to date.

Tesla share price: rising against the odds

The continued rise of Tesla’s share price is mind-boggling. Despite having a global auto market share of just 0.8% and having never made a profit, Tesla is currently the highest-valued car company in the world. Last year the company posted a loss of $862m with turnover of over $24.6bn, though its last two quarters were profitable. It’s not been the easiest start to 2020 either. The Covid-19 pandemic had an impact on Tesla, as the company had to temporarily close its car plants in China and California.

Having missed out on its target for 2019, expectations were high that the company would be able to meet its target for 2020. Original guidance was for a target of over 500,000 cars, however this is likely to be difficult to achieve given the amount of production time lost.

How did Covid-19 impact Tesla production?

The business appeared to have avoided the worst effects of the shutdown in Q1, delivering 88,400 cars and posting a $16m profit. At the time, management said they had the capacity to produce over 100,000 vehicles a quarter, before the California plant halted work on 23 March. The closure was met with outrage by the ever-outspoken Musk, but steps were taken to cut costs by furloughing staff and cutting production, with operations eventually restarting in May as restrictions were loosened.

Despite all these hurdles, Tesla have announced that it produced 82,272 new cars during Q2, with its popular Model 3 and new Model Y SUV accounting for a high percentage of those numbers.

Q2 results: how will Tesla’s share price react?

Elon Musk will be hoping for a repeat of 2019, where a poor first half was followed by a bumper second half of the year. However, the Covid-19 pandemic may have other ideas. Expectations are for a quarterly loss of $0.57 a share, bringing to an end a run of three successive profitable quarters, denting Tesla’s chance of entering the S&P 500 for the time being.

Tesla will announce its Q2 results on Wednesday 22 July. What impact will the latest numbers have on the Tesla share price?

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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