With the upcoming quarterly earnings report for Tesla Motors Corp (NASDAQ: TSLA) about to be released, investors and analysts are keeping a closer eye on the electric car manufacturer’s stock.

Link to Call: Click here to see link to call - 5:30pm EST

Expectations: $811mm  in Q2 with $3.4mm in profits and ($0.11) EPS or $0.03-$0.04 Adjusted EPS compared to last quarter’s $0.12.  Sales in China are the biggest question.  Investors are encouraged to participate in the company before sales in China start growing fast, by then the stock price may climb too high.  21,000 sales are expected globally with 14,000 units being sold domestically totaling 35,000 expected annual deliveries.  Tesla’s adjusted gross margin at 25.4% is double compared to traditional car makers, and if their margin falls significantly this could factor into the stock price as well.

For the stock to soar, we need to see that Tesla beats deliveries expectations, earning expectations and increases gross margins.

From their past earnings, Tesla has a 50% positive earning surprise which has caused the stock to soar.

Earlier this quarter, Tesla Motors came under attack for a battery fire due to a crash involving a stolen Model S vehicle. Shortsighted investors immediately got swept up in the media hype that brought Tesla’s second quarter deliveries into question. However, prudent investors are aware that the Tesla Model S crash is not a huge mover of Tesla’s shares, but rather the company’s six year potential.

Tesla is a growth stock with exponential progression. Currently, the Tesla stock trades at approximately half of that of General Motors Corp (NASDAQ: GM), despite the fact that Tesla is slated to deliver only 35,000 units this year, while GM had delivered roughly 9.7 million vehicles last year in 2013. The huge difference between the electric car maker’s 2014 guidance and its valuation shows the extent of the confidence the market has for Tesla.

Tesla’s plans for the next year years are summarized in this chart:

In order to fully understand the chart, it is necessary for investors to realize the catalysts that will drive Tesla’s growth in the upcoming years.

1. Expansion overseas. Tesla’s addressable audience expands as it extends its reach into new, international markets. For example, China is considered to be Tesla’s most promising market yet. The company expects that in a few years, deliveries in the Asian country will exceed those in the United States.
2. Increasing impact in retail. Even in its counry of origin, Tesla lacks any significant influence in retail. According to Elon Musk, the founder and CEO of Tesla Motors, the company will increase the number of service centers and store around the world by 75% in 2014. Since the company does not spend money on advertising, retail locations and storefronts are vital to inciting word of mouth marketing, consumer education, and sales.
3. The Brand New Model X. Tesla’s 100% electric SUV is on track to begin deliveries to customers by the first six months of 2015. Analysts say that the demand for Model X vehicles could exceed the demand for Tesla’s current Model S.
4. Tesla’s More Affordable Model. The sales performance of Tesla’s newest car with a lower price tag is vital to the company’s success as a member of the mass market. Elon Musk has stated that the new vehicle will be able to travel more than 200 miles, and be 20% smaller in size compared to the Model S. The price is estimated to be approximately $35,000. Given the significantly lower price, Tesla expects this model to sell hundred of thousands of units per year.
5. Tesla’s Super Gigafactory. Tesla’s most recent investment was its Gigafactory, a new facility that will be able to produce enough lithium ion batteries to enable the company to manufacture 500,000 vehicles per year by 2020. This figure is higher that the number of lithium ion batteries in supply around the world today.

Analyst Viewpoints

Morgan Stanley reiterated their rating today as of this afternoon.  Zacks with a prior price target of $238.00 downgraded their price target to $218.00, changing their viewpoint from outperform to underperform.  Robert W. Baird reiterated their positive rating in May.  Morgan Stanley is still firm on their $320.00 price target citing numerous factors.  Wedbush also has a high $275.00 price target rating.  Goldman Sachs and Morgan Stanley both have conservative ratings with $200.00 and $164.00 respectively.  Overall we have 1 sell rating, 5 buy ratings and 1 strong buy ratings.  Their consensus price target is $215.27 with a 5.96% downside risk from the current price of $223.70.

Earnings

As we are nearing a market close, the stock seems to be sliding due to anticipating that the company may not beat earnings expectations.  During the past five consecutive quarters, Tesla turned around their losing streaks and beat analysts expectations consistently.  Their last earnings were $713 million compared to the $699 million that analysts expected.

Directors

Most of their directors are selling shares in the company, but this could be due to tax reasons.  Directors are often taxed for holding stock and thus they need to sell off some of their holdings to pay taxes for the shares they hold.  This should not be looked into too strongly.

It are these factors that investors should be focusing on. Given the significant yet volatile nature of these factors, we can expect to see Tesla’s stock experience many ups and downs. Since Tesla is surrounded by so many forward looking and optimistic assumptions, any report, news, or events that says otherwise could severely impact the confidence levels towards the company and have an effect on the stock.

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