Tesla Stock Forecast

Tesla will present their first quarter earnings report today after the market closes, and there are some key things that investors should keep an eye on, besides just the revenue growth and cash burn figures that will surely be talked about by analysts after the report.

Progress With New Car Models

The automobile maker will release a Model III vehicle in the future for only $35,000. This vehicle will be made available roughly when other major automotive companies will release their own electric vehicles with similar prices and ranges. While Tesla has a head start in this area with their battery technology and experience with these kinds of vehicles, any updates on whether an alpha version of the vehicle has been made yet could ease concerns of the vehicle not being delayed. This version of the electric vehicle will make it much more accessible to average consumers.

More importantly, watch out for updates on the new basic Tesla S model. The old base model has been replaced with the 70D, which is a more expensive all-wheel drive version of the vehicle. Customers had been passing up the base model for more expensive versions, and it will be interesting to see if the new model has made any inroads for the company in the entry level market.

The most important update will be for the Model X, though, a new SUV model expected to hit the market by July. Tesla has previously estimated that it will sell around 55,000 vehicles during the fiscal year, and the success of the Model X model will be key to attaining this amount of sales. The SUV and crossover market has seen sales increase drastically this year, and an electric version could prove to be extremely popular among customers. Despite delays, the newest model already had reservations for roughly 20,000 vehicles through February, and CEO Elon Musk will be pressed for updates on the newest model.

Addressing China Sales

The stock price had struggled during the end of 2014 and the beginning of 2015, because China sales were far less than expected, with Tesla only delivering 120 models during the month of January. It is the only country where the Tesla S Model is sold that demand does not outstrip supply. Much of the problem in China was a misconception in China about the availability of recharging stations and a misunderstanding of the Chinese luxury car market.

Musk changed the executive leadership team in the region to try to address the availability of recharging stations for the vehicle and how it would work with customers. More importantly, they have also made options for the vehicle available to make it more desirable among Chinese consumers. Luxury car owners in China like to be chauffeured around in the back seat, something that Tesla did not understand.

The Tesla S Model has a rather small, uncomfortable back seat, making the luxury vehicle a bad fit for that market. Now, Tesla has introduced “executive rear seats” as a $2,000 option. Tesla is able to respond quickly to these kinds of requests because of their direct-sales method. The extra package includes better, leather-wrapped seats, and passengers can use a smartphone to control media, climate, and panoramic roof settings from the back seat.

The company will also sell 100 Tesla Model S85 vehicles to a local taxi company. Wuhan Tricycle Automobile Co., based in the small city Wuhan, China, has already bought ten of the models and will purchase another 90 in the future as part of a trend for taxis and other transportation services to start using electric vehicles. These electric vehicles will be for rich business class users, and should help increase sales in the region by growing exposure in the market and showing that the vehicle is easy and practical to use in the area.

Progress in this region will be a key takeaway from the earnings report, as struggles in China have suppressed the stock price from the all time highs it reached in 2014. If things are turned around in this market, operating margins and sales could be boosted. Much of the concern over China sales are overblown, but addressing them and fixing the problem could send the stock price on a tear.

Algorithmic Analysis

I Know First supplies financial services, mainly through stock forecasts via their predictive algorithm. The algorithm incorporates a 15-year database, and utilizes it to predict the flow of money across 2000 markets. The algorithm has more data to forecast within the long term and, naturally, outputs a more accurate predication in that time frame. Having said that, intraday traders, along with short-term players, will also benefit by taking the algorithmic perspective into consideration.

The self-learning algorithm uses artificial inelegance, predictive models based on artificial neural networks, and genetic algorithms to predict money movements within various markets.

The algorithm produces a forecast with a signal and a predictability indicator. The signal is the number in the middle of the box. The predictability is the number at the bottom of the box. At the top, a specific asset is identified. This format is consistent across all predictions. The middle number is indicative of strength and direction, not a price target. The bottom number, the predictability, signifies a confidence level.

The above forecast includes a 3-month prediction from January 28th, 2015. Tesla had a signal strength of 217.63 and a predictability indicator of 0.33. In accordance with the algorithm’s prediction, the stock price increased 11.89% in the predicted time horizon. Having demonstrated an example of when I Know First’s algorithm was able to correctly predict the behavior of Tesla’s stock price in the past, looking at the current forecast can help predict what will come after the earnings report.

Tesla is among the top stock picks for the algorithm in both the three-month and one-year forecasts. This suggests that the stock price is greatly undervalued ahead of its earnings report, setting the stock price up to skyrocket if the company provides positive updates on its new Model X vehicle and its progress in China. Meeting the prediction of 55,000 sales this year will be vital for investors’ confidence in the stock, and will play a large role in its price as well.