Tesla Stock News and Forecast: Why is TSLA falling after earnings?

Tesla (TSLA) shares are currently trading lower in the premarket after releasing earnings last night. The stock is trading at $858.63 for a loss of nearly 1%. The stock had been rallying strong into those results, so it may be that despite beating on EPS the beat was essentially already priced into the stock. 

Tesla 15-minute chart

Tesla (TSLA) stock news

Tesla released earnings after the close on Wednesday, showing continued strong growth in vehicle sales. The electric vehicle (EV) sector leader delivered a strong beat on EPS coming in at $1.86 versus the $1.57 estimate. Revenue was also ahead of forecasts, coming in at $13.76 billion versus the consensus estimate of $13.63 billion. It should be noted some outlets are saying revenue missed as $13.92 billion was the estimate, but we use Refinitiv IBES data, which is generally accepted as the industry standard. Margins were also high on the investor watchlist due to rising supply costs, but these also increased to 30.5% from an estimate of 28.4%. Tesla said in a press release, “Our operating margin reached an all-time high as we continue to reduce cost at a higher rate than declines in ASP.” 

Why is Tesla (TSLA) stock falling?

Earnings were good, but the simple fact is the stock price has run up close to record highs in anticipation of a strong result. Stocks have been beating expectations for most of 2020 and 2021 now, so while Wall Street expectations may be set at certain levels, investors are now assuming that most companies will beat. Only extraordinary beats will see price surges. Added to this is the absence from the earnings conference call of Elon Musk. This had been flagged, but it is still unusual for a CEO not to attend the conference call.

Tesla also hinted at unknowns going forward in relation to cost pressure from the supply chain. "There's quite an execution journey ahead of us ... uncertain environment with respect to cost structure ... Q4 production will depend heavily on availability of parts, but we are driving for continued growth," Chief Financial Officer Zachary Kirkhorn said. As we always say, markets hate uncertainty more than bad news.

News from the Berlin mega factory is not exactly positive either this morning with more uncertainty now heaped on the stock. Reuters is reporting that the regional environmental ministry near Berlin is holding a second online discussion forum for citizens due to resident dissatisfaction with an earlier forum regarding Tesla's new German factory.

Tesla (TSLA) stock forecast

The strong move is now running out of power and is putting the uptrend into question. While Tesla remains well above the 9 and 21 day moving averages, it is heavily overbought on the Relative Sterngth Index (RSI). The last time it was this overbought was back in April when it reached an all-time high and then fell steadily lower. At least back then the earnings report missed estimates, not the case this time around. However, overbought is overbought, and momentum is definitely slowing, so caution is needed. If long, use a trailing stop to at least guarantee some profits. We are turning negative despite the chart being bullish. We do not think there was enough in the earnings release to push the stock higher. $780 to $800 is a strong support zone and where the recent rally took off from. 

For those more bullish, there is a gap to fill at $840, so this can be used as a support, and the 9-day moving average will also have tracked to this level.