Quarterly report risks triggering Tesla stock correction

Tesla’s stock has shown a decent rebound from the $295 level over the past two weeks. During this period, the share price gained nearly 15%, but by the end of yesterday’s trading session, buyer activity began to fade. As a result, the price closed on Monday with a slight decline, even though it had been up by as much as 2.5% intraday. Expectations for Tesla’s quarterly earnings report due tomorrow are adding to the unease. If the financial results disappoint, the stock could quickly erase its recent gains and fall back to the $295 mark.

According to UBS forecasts, Tesla’s gross margin will continue to decline. At the beginning of last year, this metric stood at 16%, but it may now drop to 10%. The company is forced to offer discounts to remain competitive against Chinese EV manufacturers. Additionally, the issue of import tariffs remains unresolved. Although Tesla produces most of its vehicles in the US, its batteries are sourced from China. Because of this, the outcome of trade negotiations between the two countries poses a significant risk.

Bank of America analysts also highlight the impending termination of US EV purchase incentives. They estimate that Tesla will start feeling the impact of Donald Trump’s decision this fall. Some positive news for investors could come from expanded testing of autonomous taxis, but this will likely have only a psychological effect. The influence of this segment on the company’s overall performance will remain negligible in the near future.

Beyond this, Elon Musk may provide more details about Tesla’s expansion into India. Last week, the company opened its first store in Mumbai, but Counterpoint’s expert Soumen Mandal downplays its significance. Only the Model Y is currently available to buyers, with a starting price of $70,000. In the US, the same EV sells for $45,000, while India imposes nearly 100% tariffs on imported cars. Without local production, Tesla will struggle to capture a significant share of the Indian market.

On the daily chart, Tesla’s technical indicators have approached an overbought territory, signaling a high risk of a downward reversal. The correction could target the $295 level.

Consider the following trading strategy:

Sell TSLA at the current price. Take profit — 295. Stop loss — 355.