To The Moon

Without fail, the dump repeats after the Tesla's earning most often than not. No difference this time as anticipated from my post on 17 April expecting a big move with the very rare double inside bar candlestick pattern.

Elon Musk's electric-vehicle maker has lowered prices for models in the U.S. by between 14% and 25% this year as it contends with weaker demand, higher interest rates and burgeoning competition. The latest round of reductions came on the eve of earnings.

Teslas sold for an average of around $46,000 in the first quarter, less than the company had forecast and down from some $52,200 in the first three months of 2022.

Higher volume with a lower margin

"We've taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin," Mr. Musk, Tesla's chief executive, said Wednesday on an earnings call, adding that he expects to be able to harvest additional software revenue down the line.

Tesla's price reductions jolted sales, at least initially, and orders are now "in excess of production," Mr. Musk said.

But lower prices weighed on first-quarter profit, which fell to $2.5 billion, down from $3.3 billion a year earlier. Revenue rose 24% from the year before to $23.3 billion, as Tesla delivered more cars to customers.

Tesla's operating margin, a measure of profitability, took a hit, falling to 11.4% from 19.2% in the first three months of 2022. Tesla's margin remains among the highest in the auto industry. Ford Motor Co.'s operating margin was around 4% in 2022, and General Motors Co.'s was around 6.6%, according to FactSet.

Dump at earnings

Tesla's stock, which closed Wednesday at $180.59, is up nearly 50% this year after a challenging 2022. Shares fell more than 3% in after-hours trading.

Tesla is betting that it can develop software that enables its vehicles to operate autonomously. Mr. Musk said Tesla could reach that milestone this year, though the company has missed earlier targets. Its existing software assists drivers with tasks such as navigating city streets and matching the pace of traffic on the highway.

Tesla produced almost 18,000 more vehicles than it delivered to customers in the first quarter, and its inventory rose to 15 days of supply, from three early last year. Continued price reductions have stoked concern among investors that Tesla won't be able to maintain its growth without further cuts.

Tesla delivered 422,875 vehicles in the first quarter, up 36% from the year before. Model 3 sedans and Model Y crossovers, Tesla's more-affordable offerings, made up nearly all of those deliveries.

A new U.S. law, the Inflation Reduction Act, provided Tesla an extra boost. Beginning in January, many buyers of Tesla's two most-popular models were eligible for a $7,500 federal tax credit. The available credit fell by half this week for Tesla's most-affordable Model 3 car because new, stricter requirements went into effect.

Tesla again suggested it aims to deliver some 1.8 million vehicles this year, or around 37% more than it did in 2022.

To support its longer-term growth, the company is planning a new manufacturing plant near the industrial hub of Monterrey, in northern Mexico, and a new battery factory in Shanghai.

Tesla currently sells four passenger models. It has been working to bring the Cybertruck pickup to market later this year with first deliveries expected in the third quarter, Mr. Musk said.

Am I distracted or simply multitasking?

"The fact that Tesla is cutting price on its longest lead time model suggests other price cuts are likely to follow," Bernstein Research analyst Toni Sacconaghi Jr. said in a recent note to investors, before Tesla's latest cuts.

In the U.S., Tesla lowered the price of what Bernstein estimates is its most popular vehicle -- the long-range Model Y crossover -- by $5,000 this month. That configuration now costs $49,990, before taxes and fees. That's almost in line with the average cost of a new car in the U.S., which was around $48,000 in March, according to Kelley Blue Book.

Breakout after earnings

⚠️Trading Tips: Market started to dump TSLA 15 minutes before close. The price action has dip below its one month channel. Looking at puts under 169 to 165 and calls above 172.5 to 176 on Thursday. Price should recover gradually towards 190 in the next 2 weeks. 😉

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