What investors need to hear from Tesla this week: Morning Brief

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Monday, January 23, 2023

Today’s newsletter is by Brian Sozzi, an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn. Read this and more market news on the go with the Yahoo Finance App.

Last week in Davos, Elon Musk didn’t come up in one chat — on or off the record — among any of the 75+ business leaders that I talked to at the World Economic Forum.

Even a few drinks in at assorted evening cocktail parties brought no mention of Musk. That’s despite Musk trying to insert himself into the annual event with antagonistic tweets.

The bottom line is that the stock market and Corporate America does not revolve around Elon Musk, Twitter, Tesla, SpaceX, The Boring Company, or anything else tied to the mega-billionaire.

Tesla founder Elon Musk attends Offshore Northern Seas 2022 in Stavanger, Norway August 29, 2022. NTB/Carina Johansen via REUTERS

But this week, Tesla’s earnings report due out after the close of trading on Wednesday will certainly bring attention to the core of Musk’s business empire.

And for the bull case to be recharged on Tesla stock, I fancy two things need to happen.

The first is investors have to get clear guidance from Musk on how long recent global price cuts will remain in place.

Recall Tesla cut the price of the Model 3 base version by $3,000 to $43,990 in the U.S. earlier this month. The Model 3 Performance variant saw a price cut of $9,000 to $53,990. As for the Model Y Long Range, the price was dropped $13,000 to $52,990. The Performance model was cut to $56,990, about $13,000 cheaper than the prior price.

The U.S. discounts come hot on the heels of recent price reductions in China, Japan, and South Korea as Tesla looks to reignite demand against growing competitive threats. As long as the market believes Tesla will use price drops to stoke demand, the stock is likely to stay under pressure as investors attempt to model 2023 earnings power for the electric carmaker.

Second, the market needs to hear realistic unit volume growth for Tesla and get comfortable with it.

Tesla guided investors to about 50% unit volume growth in 2022 — the actual figure was 39%. I am hearing whisper numbers for this year around 25% to 30% unit volume growth. Tesla would be wise to forecast something on the lower end of that range and set the stage for beating that guidance.

I think investors would welcome the conservatism this week from an often crazy-bullish management team.

The bar is high on Tesla pleasing the market on both of these accounts.

On Wednesday evening, make sure to tune into Yahoo Finance Live — on our homepage, app, YouTube, etc. — immediately after Tesla’s earnings call wraps in the evening. Yours truly and Brad Smith will be providing instant, actionable analysis of Tesla’s earnings call, and maybe sipping a happy hour drink while doing it.

In the meantime, Happy Trading!