The Good And Bad News About Tesla’s Q1 Earnings

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In hisDaily Market Notes report to investors, while commenting on Tesla Inc (NASDAQ:TSLA)’s losses, Louis Navellier wrote:

Q1 2021 hedge fund letters, conferences and more

S&P Good For Another 10% Upside

Another 10% upside for the S&P looks good to go . . . With the month of May just beginning – and already getting plenty of scrutiny as to whether investors should “sell in May and go away” – it seems pretty clear to me that, based on how well a number of fluid factors are playing out, the S&P 500 is ripe for advancing another 10% from its April 30 level of 4,181.

Sure, a 5% pullback below 4,000 is quite possible – and more likely probable, in that the narrative of the past week was to sell on the earnings news, regardless of the blowout numbers crossing the tape.

It was widely signaled that traders and investors were looking to book profits on gap-higher moves related to big-time earnings beats and, in many cases, that’s how most of the leading stocks traded. Stocks gapped higher at the opening on quarterly reports posted after the previous night’s close, or those posted in the pre-market hours, and we saw selling pressure in nearly every case.

This has been the pattern of the past three weeks, ever since earnings season opened with the big banks in the week of April 12-16. Initially, profit taking hit the banks – but now they are hitting new highs.

Durable Goods Orders Are Up 0.5%

Turning to the economic dashboard, the Commerce Department announced that durable goods orders rose 0.5% ($1.4 billion) to $256.3 billion in March, well below original expectations. Durable goods orders have now increased in ten of the past 11 months and are indicative of a robust manufacturing sector as well as strong consumer spending.

One reason why durable goods orders remain strong is that existing home sales and new home sales remain robust, which in turn, fuels the sales of appliances, building materials,

Trade volume soared in March, according to the Commerce Department as exports rose 8.7% to $140 billion, while imports rose 6.8% to $ $232.6 billion. Any time both exports and imports are rising is a signal of robust global economic activity. Inventories were largely depleted in March, so both exports and imports should continue to rise in the upcoming months.

Although a rising trade deficit can be a drag on GDP growth, the Commerce Department announced on Thursday that its preliminary estimate for first-quarter GDP growth is an annual rate of 6.4%. which was below the economists’ consensus estimate of 6.7% and the Atlanta Fed’s latest estimate of 7.9%, but if that rate holds up for the full year it will be the most rapid GDP growth rate since 1984.

The Good And Bad News About Tesla

Tesla Inc (NASDAQ:TSLA)’s first-quarter announcement last Monday was very interesting. Let me start with the good news. The company’s revenue rose 74% to $10.39 billion, which was 1% better than the analysts’ consensus estimate of $10.29 billion. Tesla also earned $438 million, or 93 cents per share, in the first quarter, which was 17.7% higher than the analysts’ consensus estimate of 79 cents per share. So far, so good.

Now, here is the bad news. Tesla collected a record $518 million in carbon/EV tax credits, plus $101 million in short-term gains from selling 10% of its $1.5 billion Bitcoin investment. In other words, Tesla made $619 million last quarter from “extraordinary” items. Subtract that $619 million from the $438 in net earnings and they once again lost money in their operations.

In 2020, Tesla received $1.58 billion in EV tax credits, but only made $721 million total, so the company actually lost $859 million from making EVs. Clearly, that trend is persisting in the first quarter of 2021.

[Navellier & Associates does own Tesla (TSLA), in a managed account for one client, per client request. Louis Navellier does not own Tesla (TSLA) personally.]

I mentioned on YahooFinance on Wednesday that the Fed will likely allow inflation to rise to 2.4% based on the Personal Consumption Expenditure (PCE) index (which is currently running at a 2.3% annual rate, while core PCE is running at a 1.8% annual pace); but the FOMC may not want to discuss tapering before the 2022 mid-term election, since the Fed likes to go into a quiet period three months before any election.

Overall, the FOMC statement and Fed Chairman Jerome Powell’s press conference just confirmed that we remain in a “Goldilocks” environment of strong economic growth and ultralow key interest rates.

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