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Tesla, Inc. (NASDAQ:TSLA) is scheduled to report its first-quarter results on Wednesday after the market close. Analysts, on average, are modeling an 18.9% drop in earnings per share to $0.86 despite the top line rising 24.40% to $23.34 billion, with price cuts expected to weigh down on the bottom line.
The Tesla Analyst: Wedbush analyst Daniel Ives maintained an Outperform rating and $225 price target for Tesla shares.
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The Tesla Thesis:
Margin Front And Center: Wall Street’s focus this time around is on the margin structure following the series of price cuts, Ives said in a note. The EV maker has announced multiple price cuts across its vehicle lineups and geographies this year.
The aggressive price cuts by Tesla were to "defend its EV turf and put an iron fence around its consumer-installed base," Ives said.
"Price cuts came at a price and this tug of war between volumes and margins is now the big debate on the Street heading into earnings and the rest of FY23," he added.
The bull-bear debate is now centered around when the price cuts would end for Tesla and what the margins would be like for Tesla on the "other side of this cycle" through 2023 in a choppy macro, the analyst said. He expects auto gross margins north of 20% as the key threshold over the coming quarters.
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See Also: Everything You Need To Know About Tesla Stock
Not Yet Done Yet: Calling the price cuts a "near-term pain for a long-term gain poker game," the analyst said they have stimulated consumer EV demand. He expects further price tweaks in several geographies based on demand trends as well as tax credits.
Increased scale and scope of Tesla's production and battery capabilities in China, Austin, Fremont, Nevada and Berlin have given Tesla increased cost efficiencies to facilitate the price cuts, Ives said.
Growth Story Ahead: The Wall Street estimate for 1.8 million-unit deliveries for the full year remains intact, with the possibility of a slight upside potential based on the current demand trajectory, Wedbush said.
The firm called the March quarter a success story but opined that going forward, gaining further share in the key China market will be important for the Tesla growth story.
Tesla Price Action: Tesla ended Friday's session down 0.48% at $185, according to Benzinga Pro data.
Check out more of Benzinga’s Future Of Mobility coverage by following this link.
27% profits every 20 days?
This is what Nic Chahine averages with his options buys. Not selling covered calls or spreads... BUYING options. Most traders don't even have a winning percentage of 27% buying options. He has an 83% win rate. Here's how he does it.