Tesla Is Up By 8%, Here Is Why

Key Insights

• Tesla reports Q1 2022 results, beating analyst estimates on both earnings and revenue. 
• The material improvement in operating margin serves as the main upside catalyst for Tesla stock. 
• Investors will also stay focused on Musk’s attempts to buy Twitter. 

Tesla Stock Jumps As Q1 2022 Operating Margin Impressed Investors

Shares of Tesla  gained strong upside momentum after the company released its first-quarter report. The company reported revenue of $18.76 billion and adjusted earnings of $3.22 per share, easily beating analyst estimates on both earnings and revenue.

The company noted that its operating margin was 19.2%, which was a material improvement from the operating margin of 14.7% in the fourth quarter of 2021. The comparison on a year-over-year basis is even more favorable, as operating margin was just 5.7% in the first quarter of 2021.

The big increase in the operating margin, together with the continued increase in revenue, provided significant support to Tesla stock. However, it should be noted that the stock has already pulled back from session highs as some traders decided to take profits after the rally.

What’s Next For Tesla Stock?

Analysts expect that Tesla will report earnings of $10.56 per share in the current year and earnings of $13.72 per share in the next year, so the stock is trading at 76 forward P/E. However, earnings estimates keep moving higher, so traders are not worried about the rich valuation of the company.

The major improvement in the operating margin may serve as a longer-term positive catalyst for Tesla stock as it shows that the company’s profits could grow at a fast pace.

At this point, investors are not worried about Musk’s plans to buy Twitter  and their potential impact on Tesla stock, although this topic may return into spotlight in the upcoming days.

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