Tesla is reporting earnings this week with the stock at an all-time high — here's what to expect

• Tesla is scheduled to report Q2 earnings after the markets close on Wednesday.
• Wall Street expects a loss and weaker revenue, due to the coronavirus pandemic.
• A loss would snap a three-quarter streak of profits and mean that Tesla will yet again fail to post a full-year profit.
• Markets had bid Tesla up to historically high price levels and are currently pricing in a Q2 performance in-line with analysts' expectations.
• But Tesla could also beat or miss, and both of those scenarios deserve a look.

Tesla reports second-quarter earnings after the markets close on Wednesday. Analysts expect a loss of about $0.60 per share, on revenue of around $5 billion (according to Zacks). Both the topline and bottom line will likely have been negatively impacted by the coronavirus pandemic.

However, Tesla beat estimates for Q2 vehicle deliveries, and its business has been expanding in China, so there's a distinct possibility of a beat. The markets have amply rewarded Tesla since last year with a surging share price and market capitalization. At almost $280 billion in total value, the carmaker that sold just about 250,000 vehicles in 2019 is the world's most prized, worth more than Toyota — and more than General Motors, Ford, and Fiat Chrysler Automobiles, combined.

It's important to interpret Tesla's current value as a picture of future opportunity rather than a realistic assessment of the present. The company has been around for over a decade and has never posted a full-year profit. But the stock is up over 6,000% since the carmaker's 2010 IPO, so investors aren't disappointed. Their ranks include the big, institutional players who hold most of the stock.

So the Tesla market narrative and the actual business occupy separate realms. The most meaningful connection between the two is that for years, Wall Street demanded that Tesla execute in order to vindicate its elevated share price, and now the company has done just that, getting the Model 3 sedan on track (it now makes up the bulk of Tesla's sales) and making enough modest improvements to older vehicles to keep customers interested. The execution is also accelerating, as Tesla ramps up its new factory in China, breaks ground on a plant in Germany, and looks to place a new facility to build pickups in Texas or Oklahoma.

In that context, let's look at three scenarios that could play out on Wednesday.

Tesla beats

A beat on revenue would be unusual, so it's the bottom line that matters. Some analysts expect a narrower loss or a near break-even, in which case the dilemma for the market will be to assess whether that was priced in or mispriced. As momentum-driven as the stock now is, this could set off a big rally that blasts shares even higher in after-hours trading, setting up a big open on Thursday.

The composition of a potential beat matters. If Tesla ends up selling a lot of emission credits, which it racks up by delivering only all-electric, zero-emission vehicles, a quick pop could be followed by a reversion, as traders evaluate the results. Analysts should also be eyeing cash burn for the quarter, given that Tesla's coronavirus shutdown meant that it was spending less cash that it would have been if it had been running its California factory a full capacity.

Tesla meets

An in-line result, if nothing else, should maintain the current momentum and keep the stock price at its elevated level. That would set the stage for some new twists in the ongoing Tesla narrative, good or bad. Most likely, given the COVID-19 situation in the US, analysts will be scrutinizing the China business and trying to figure out if that's a true catalyst. There could also be some discussion, on the conference call following earnings, about forthcoming products and plans, including the Semi truck, the new Roadster, developments with the Autopilot semi-self-driving technology, and Tesla's "Battery Day", planned for September 15.

Tesla misses

A notably weaker than predicted Q2 performance won't discourage the bulls, who could simply write off the "corona quarter" and stick to their increasingly compelling long-term thesis that Tesla is going to dominate the growing global EV market. But a miss also provides an excuse for some investors to exit or trim their positions, taking profits now and looking to come back to the stock once a price correction has occurred.

Interestingly, this could be the best investor outcome, as Tesla at nearly $1,700 is in a position that it's been in before, when shares have ridden high (albeit not to today's levels). Since much of the upside has already been captured, new buyers would be overpaying for diminishing returns. Not incidentally, short sellers who have come in recently would reap some rewards, which would retain that strategy as a "reality check" mechanism, rather than the fool's errand it's of late appeared to be. CEO Elon Musk intensely dislikes short sellers, but even if they've been consistently wrong about Tesla's long-term prospects, they do give overly-enthusiastic investors something to think about.