Tesla (TSLA) Set to Report Third Quarter Metrics

Tesla, Inc. (TSLA) CEO Elon Musk has been busy as a bee since last week's highly touted "Battery Day" fell flat, dropping the stock more than 10%.The electric vehicle (EV) manufacturer signed a sales agreement with Piedmont Lithium on Wednesday, just one day after a report that plans to mine the substance in Nevada faced "stark obstacles." Musk then teased Twitter with talk about a Starlink IPO in "several years" just before Walmart Inc. (WMT) tripled its Canadian Tesla Semi order and Tesla announced an 8% drop in China Model 3 prices.

Musk saved the best for last, with "familiar sources" telling EV industry portal Electrek last week that Tesla had achieved record delivery volume. Not coincidentally, the company is scheduled to release third quarter delivery and production results this week, and the article is perfectly designed to stoke expectations and investor interest. However, as the publication notes, actual metrics may not be as bullish as selective commentary from insiders.

Committed buyers have jumped back into the popular growth play since last week's misfire, lifting the stock more than 88 points in the past five sessions. Price action during the month of September carved a symmetrical triangle that has a bullish reputation, while accumulation readings have lifted into another round of new highs. Taken together, the delivery report could generate further upside, perhaps lifting Tesla into a test at the September peak above $500.

Even so, Wall Street has grown cautious about Tesla's high valuation, posting a "Hold" rating based upon 6 "Buy," 14 "Hold," and a stomach-churning 10 "Sell" recommendations. Price targets currently range from a low of just $19 to a Street-high $566, while the stock is set to open Thursday's session more than $135 above the median $302 target. This placement reflects the same question on many market minds – i.e., can Musk convert rising deliveries into profits?

Tesla Daily Chart (2019 – 2020)

A steep decline bottomed out at a split-adjusted $35.40 in June 2019, giving way to a steady uptick that reached resistance in the $70s at year end. The stock broke out into 2020, lifting into the $190s and turning tail during the pandemic selloff. It bounced strongly at breakout support, reaching the first quarter high in June, ahead of a momentum-fueled advance that posted an all-time high at $502.49 on the first day of September.

The stock sold off into the 50-day exponential moving average (EMA) and bounced once again, easing into a symmetrical triangle pattern that has posted a lower high and higher low. This raises the potential for another higher low, perhaps in the $360 to $380 price zone. Meanwhile, the on-balance volume (OBV) accumulation-distribution indicator continues to tick higher, indicating that new investors are coming off the sidelines, despite Wall Street warnings and high-percentage returns.

A rally above $470 would brighten the already positive outlook, but it's wise to expect fresh selling pressure just above the $500 level. On the flip side, the 50-day EMA marks a line in the sand for the current pullback, with a breakdown exposing further downside into the 200-day EMA below $250. Of course, sidelined market players won't mind if that happens because the stock will trade much higher in coming years if real profits start to accumulate.

The Bottom Line

Tesla is scheduled to provide insight on third quarter performance trends prior to the end of the week.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.