Ahead of third quarter earnings for electric vehicle leader Tesla Inc TSLA, an analyst breaks down the impact that margins, guidance and reported delivery numbers could have on the stock.
The Tesla Analyst: Wedbush analyst Daniel Ives has an Outperform rating and price target of $350 on Tesla.
Related Link: Tesla Q2 Earnings Highlights: Revenue Beat, EPS Beat, Cybertruck Update And More
The Analyst Takeaways: Tesla is expected to report third quarter revenue of $24.21 billion and earnings per share of 75 cents, according to data from Benzinga Pro.
While many investors will be looking at revenue and earnings per share, the company’s margins and outlook could be the keys after reporting weaker-than-expected third-quarter deliveries, Ives said.
“Even when factoring in the shutdowns with no rose-colored glasses Tesla clearly missed Street estimates this quarter with bulls left disappointed, although we see better days ahead for 4Q and 2024,” Ives said of third-quarter deliveries.
The analyst said third-quarter delivery numbers came in lower than expected, but that could lead to a shift of around 20,000 units into the fourth quarter.
With factory shutdowns and upgrades now behind the company, coupled with several price reductions, Ives said that Tesla's reported gross margins might be a crucial point of interest.
“The Street has shown patience but the time to see a line in the sand for the price cuts is now here we believe and investors will be listening for [CEO Elon] Musk to discuss the philosophy around price cuts going forward especially in the US and China.”
Ives said the price war in China is a “high stakes poker game” for Tesla with a focus on volumes over margins, a strategy that can’t continue at the current pace going into 2024.
Other key issues expected to be addressed by Tesla and Musk during the third quarter report and earnings call are the Model 3 refresh, demand trends, Cybertruck expectations and timeline, and China, according to Ives.
“While the macro is clearly not roses and rainbows we believe Tesla’s demand story has stabilized at current price levels with a focus on a strong 4Q ahead.”
TSLA Price Action: Tesla shares are up 1.2% to $254.20 on Monday, versus a 52-week trading range of $101.81 to $299.29. Shares of Tesla are up 134% year-to-date in 2023.
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