TSLA stock has rallied in recent weeks, and it is trading near its record high. Since the beginning of this month, the shares are up around 28% ahead of Tesla’s (NASDAQ:TSLA) earnings expected on January 29.

Investors to Focus on Tesla Earnings

The stock currently trades at 102.7X the estimated 2020 earnings, and it seems that it might have grown ahead of itself. Therefore on Wednesday, when the company releases its earnings, management will have the task of convincing investors that this strong rally is justifiable. Tesla stock started surging from mid-December 2019.

In the earnings, investors will expect the company to give assurance that the demand for its cars is strong, that there is smooth production, and that margins are going to improve. All this has to be achieved by ensuring the new giga-factories do not take an outsized percentage of the balance sheet.

According to analysts, the company expects GAAP earnings of $0.43 per share compared to $0.788 per share in Q4 2018. Equally, adjusted profits will be around $1.65 per share relative to the $1.93 per share reported a year ago. The company expects revenue of $7.1 billion down from $7.2 billion last year, but analysts are expecting sales revenue of around $6.9 billion.

At the time of writing, TSLA stock is down 3.42% at $545.50.

UBS Analysts Bearish on Tesla

Various analysts are holding different positions for Tesla stock, with Daniel Ives of Wedbush maintaining a bullish position while UBS’s Patrick Hummel is holding a bearish position. UBS is bullish on Tesla but bearish on its stock.

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Regardless of the “sell rating,” Hummel is confident about Tesla’s prospects, projecting that the company’s operating margin could reach 10% by 2022. He is also calling for a free cashflow ranging from $3 billion to $5 billion in the next two years. However, the bearish argument is a result of the valuation of TSLA stock and not the underlying performance of the company.

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