Tesla options suggest its shares won't get back to $200 until July now, instead of May. Tesla earnings margins not expected to recover till 2025. Why watch Mag-7, Oil & US defence stocks this week
Stock watch amid this make or break week. In this week's stock watch we cover everything you need to know about Tesla. Will it tumble or rally? Why its shares could hit $200 but some think it won't recover until next year. Plus we cover US defence contractors Lockheed Martin and Northrop Grumman reporting this week, as well as Mag-7 names Meta, Microsoft, Alphabet, as well as Intel, and Exxon, which has quietly overtaken Tesla in market cap by the way.
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Will Tesla tumble on Tuesday or rally up?
Tesla $Tesla (TSLA.US)$ results on Tuesday will be in the spotlight with its earnings expected to disappoint estimates yet again, while its revenue probably fell for the first time since 2020 after its largest delivery drop on record, according to Bloomberg. Revenue is expected to have fallen 4.4% YoY to $22.305B with earnings expected to have dropped 22.1% to $3.323B. This is according to Bloomberg Consensus.
It's hard for Tesla shareholders with its shares down 40% this year. That said, it appears TSLA shares are oversold and could be due for a small bounce. The reason I say small bounce is because...options traders erased their bets for Tesla to get back to $200 next month. So instead of options traders betting Tesla will get back to $200 in May, the options market is now saying Tesla won't get back to $200 till July 19 with 10,073 contracts out for Tesla to hit $200 then. On Friday, an extra 2,216 contracts were bought, betting Tesla will get back to $200 on July 19.
It seems the market wants more good news. The recent annoucements are not enough. Tesla cut its EV costs globally, and 10% of its workforce. And an unknown source at Tesla says, job cuts could reach 20% in some divisions. It really seems the market is awaiting major data that we don't have. No one likes being in the dark. We need details of the of launch the robotaxi later this year, the launch of its cheapest EV, with a $25k price point. We need to see traction from its offer of 0% Tesla car finance in China, and we need other details on how else Tesla could revive demand falling demand, at a time when BYD is seeing quicker sales growth YoY with Xiaomi launched an EV that charges in 5 minutes.
If you are a believer in Tesla 33% of analysts who cover Tesla says its a buy with the average 12-month price target $185.75, which implies 26% upside.
However, I always say earnings drives shares price growth. So you may probably not see its shares materially move higher until maybe later this year, as investors look forward to earnings per share GROWTH returning in 2025.
In 2023, Tesla's EPS GROWTH declined 23%, this year EPS growth is expected to fall 11% and next year recover with 33% growth. We can see this below.
Here is a chart of Tesla's earnings and its shares, illustrating my above point. GROWTH is key to turning its shares around. So maybe do not expect a recovery until the market starts to understand that Tesla margins can return to growth phase.
Defense government contractors: Defense stocks kick off earnings on Tuesday, with Lockheed Martin ( $Lockheed Martin (LMT.US)$ ) out of the gate, and Northrop Grumman ( $Northrop Grumman (NOC.US)$ ) on Thursday. They’re key US defense contractors and will be a key focus as Middle East tensions escalate, while the US and Australian governments increased their defense budgets yet again. Plus, there are proposals to send aid to Israel, Ukraine and Taiwan in the works and this may boost military gear and weapons sales according to Bloomberg. Lockheed Martin’s (LMT) operating income is expected to have fallen 6.6%, consensus shows, partly due to losses tied to a classified missile program. While demand for Lockheed’s legacy missiles is expected to remain strong. Lockheed also wont a $17 billion contract to create new anti-ballistic missiles. Northrop’s results are out Thursday. It’s expected to post a 5.6% bump in operating income.
Mag-7 in the spotlight. Will Meta's results $Meta Platforms (META.US)$ delight again? On Wednesday Meta’s average revenue per user should increase to $11.59, according to consensus estimates. The social network company is better positioned than peers for a faster rebound in average revenue per user, but its Blue app has lost engagement, according to Bloomberg.
Expectations are high for Microsoft's results $Microsoft (MSFT.US)$ on Thursday. Its commercial cloud revenue growth is expected to remain strong at 19%. While growth across most cloud products are expected to be strong, yet guidance on Azure may be affected by a worsening business climate amid increased Middle East uncertainty, according to Bloomberg.
Expectations are high for Microsoft's results $Microsoft (MSFT.US)$ on Thursday. Its commercial cloud revenue growth is expected to remain strong at 19%. While growth across most cloud products are expected to be strong, yet guidance on Azure may be affected by a worsening business climate amid increased Middle East uncertainty, according to Bloomberg.
Also on Thursday, Alphabet's $Alphabet-A (GOOGL.US)$ results will be released, with revenue expected to expand 13% for a second straight quarter. Generative artificial intelligence workloads and copilots should boost the company’s cloud segment revenue by 400 basis points to 600 basis points, according to Bloomberg.
Also on Thursday, Intel's $Intel (INTC.US)$ revenue is expected to have grown 8.6%, driven by client computing. Still, four of its six segments probably saw sales slump. Analysts will look for comments on China ordering telecommunications companies to replace all foreign chips in the country’s networks by 2027.
And finally on Friday, Oil companies will probably steal the show, with energy companies shares outperforming the market, with Exxon's $Exxon Mobil (XOM.US)$ market cap now overtaking Tesla. Is this a sign of the times? Exxon's (XOM) adjusted earnings per share will likely come in 12% lower than its prior quarter due to falling energy prices and a drop in profit from mark-to-market derivatives. Also keen an eye on Chevron ( $Chevron (CVX.US)$), and Phillips 66 ( $Phillips 66 (PSX.US)$), which also report Friday, should also report declines in earnings. But,
For my note on what to watch this week in terms of economic, and why this market is pressured, but what traders and investors are buying and why they are buying $Invesco QQQ Trust (QQQ.US)$ and $iShares Semiconductor ETF (SOXX.US)$ click here.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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