Why Did Tesla Stock Fall 3.4% on Wednesday?

Tesla (TSLA) shares fell 3.4% on Wednesday and 5.8% since the start of 2022, losing momentum after announcing record deliveries of electric vehicles. Tesla to report its earnings and earnings for the quarter on January 26th, what should investors expect?

In early 2022, Tesla announced record quarterly EV deliveries, prompting a number of Wall Street analysts to raise both their price targets for Tesla stock and the company's Q4 earnings and earnings forecasts.

But despite good forecasts, Tesla shares are down 5.78% year-to-date and closed down 3.4% on Wednesday.

Why Did Tesla Stock Fall 3.4% on Wednesday?

The fall in shares was most likely due to the general trends in the stock market as a whole. Experts note that with the approaching increase in interest rates by the Fed (the first increase may occur as early as March), pessimism prevails in the markets today and technology stocks react most sharply.

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Since the beginning of the year, the S&P 500 and Nasdaq Composite indexes fell by 4.9% and 8.34%, and on Wednesday they closed trading with a decrease of 0.97% and 1.15%, respectively. Other large-cap stocks such as Apple (AAPL) and Amazon (AMZN ) also fell 2% and 1.65% on Wednesday, respectively.

Investors should be prepared that the already volatile Tesla stock will continue to be subject to market fluctuations.

What to expect from the upcoming Tesla report?

Tesla will report Q4 2021 earnings and earnings on January 26 after the close of trading. Given the record sales of electric vehicles, the company's revenues and profits should also reach new highs. At the same time, it will be extremely important for investors to hear forecasts of production and sales, as well as profits for 2022.

Wall Street's median forecasts are for Tesla's Q4 earnings per share of $2.25 compared to $1.86 in Q3 and $0.80 in Q4 2020. Quarterly earnings and earnings statistics on the Tesla Reports page.

Projected total quarterly revenue of $17 billion is up 59% year-over-year and 23% quarter-on-quarter.

Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as fund managers, CEOs, academics, and others, estimates Tesla's earnings will be $2.53 per share and revenue of $17.4 billion.

Credit Suisse analyst Dan Levy, who predicts Tesla will earn $2.81 in earnings per share in the fourth quarter of 2021, notes that these four key factors will influence the growth of Tesla shares in 2022: how quickly the company increases production capacity, growth in gross profits, new battery introductions, and product announcements.

"With Tesla's demand outpacing supply, probably for the foreseeable future, Tesla's stock trajectory will depend solely on its production," Levy said.

Tesla's 2022 sales forecast by market analysts is around 1.5 million electric vehicles, up from around 936,000 in 2021. To achieve 50% growth for the company, it is critical to ramp up production at both the existing Fremont and Shanghai plants and move into mass production at the new Texas and Berlin plants.

China's "COVID zero" policy threatens to slow down rather than ramp up production, and CEO Elon Musk recently tweeted about the "supply chain nightmare" in 2021, saying the problems are not over yet.

Tesla continues to delay production of the long-awaited Cybertruck pickup truck, and investment in new plant launches could weigh on the company's bottom line in 2022.

To maintain Tesla's high valuation, management's forecasts and comments, as well as announcements of new products and technologies, will be critical.

Tesla is expected to introduce new, larger batteries in 2022 that offer better performance and longer life. Upgrading the new batteries should also allow the company to reduce production costs.

Tesla previously announced plans to create a $25,000 electric car that would open up a wider automotive market for Tesla, given that the Tesla Model 3 costs.

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