Will Tesla's Acceleration In Q2 Have Investors Hitting The Gas Or The Brake?

Now that actual auto news seems to have replaced the Twitterverse as a top concern affecting Elon Musk’s signature company, tomorrow afternoon’s Q2 Tesla (NASDAQ: TSLA) earnings could produce some of the biggest headlines this earnings season.

Topically, so many roads seem to pass through Tesla. For the markets, TSLA is now far more than a car story because it also straddles investor interest in technology, manufacturing, energy, and changing consumer tastes. TSLA’s earnings call after the close could yield fresh intelligence beyond model lineup and price and focus on where its alternative energy investments stand, what new industry partnerships it has, where its latest industry partnerships may go, and even tax policy that could help or hurt the electric vehicle (EV) market in the coming years.

So far, investors seem to be expecting positive news after Wednesday’s close. TSLA stock has been higher the past seven trading sessions and is up more than 160% year to date. The EV company lost nearly 70% in stock value in 2022 due to economic and management headwinds—mostly related to Musk’s Twitter takeover. Yet, despite significant price cuts on models through 2023, the global EV company delivered a record 466,140 vehicles in Q2, well above Wall Street expectations.

And because significant industry news always seems to come screeching in just before a TSLA earnings announcement, company executives could also spend some time Wednesday talking trucks.

Via a weekend tweet (of course), TSLA announced that its first, long-awaited Cybertruck pickup model finally rolled off the assembly line. On Monday morning, Ford (NYSE: F) took the opportunity before the open to declare price cuts of up to $10,000 on its $50,000 F-150 Lightning model, which fell behind truck maker Rivian RIVN just this year. Additionally, last week, RIVN was the subject of reports that a former top U.S. Porsche executive could be joining the company.

But in the global EV ballgame, it’s still early innings. After all, there’s China.

Earlier this month, The Wall Street Journal reported that Tesla’s price cuts spread across China’s EV industry this year, allowing Chinese EV manufacturers led by top domestic carmaker BYD to make significant gains against Volkswagen, the leading EV brand in China until this year. Could China’s role in domestic EV development eventually evolve into a model similar to Japan’s global automotive expansion in the 1970s? Tall order, but worth watching.

What to listen for in TSLA’s call

• Price cuts vs. market share gains: With price cuts apparently continuing across all EV model categories, how will TSLA fare? In raising his price target for TSLA last week to $265 from an earlier $185, Jeffries analyst Philippe Houchois said that Q2 would likely represent a “trough” in auto gross margins still under pressure. In late April, the International Energy Agency reported that U.S. EV sales are likely to jump 35% this year after growing 55% in 2022. So, what will that mean for TSLA’s bottom line for the rest of the year—and beyond?
• Plug-in wars: Last month, both General Motors (GM) and announced they’ll adopt Tesla’s North American Charging Standard in 2025. Currently, Tesla’s charging network is bigger than all of its the EV charging station competitors combined, according to a June MIT Technology Review report, noting that this could mean annual revenue of $3 billion by 2030. However, J.D. Power recently reported that EV users who charge their vehicles at home remains around 80%. Listen for insights on how public versus home charging may evolve in the future.
• Tax credits on EV purchases: Back in February, the U.S. Treasury announced that more Tesla, GM, Volkswagen, and Ford EVs would be eligible for federal tax credits of up to $7,500 after the government revised its vehicle classification definitions. However, late last week, Tesla announced on its website that its $7,500 credits for eligible buyers of its Model 3 are likely to be reduced after December 31. Musk has been a frequent critic of the government’s EV tax credit system, so it’s worth listening to see if he and other TSLA officials want to elaborate.
• Off-road performance: Remember, Tesla is also in the battery, solar, and, more recently, the AI business. TSLA began cancelling solar installation projects last year, but on Monday, it announced a “Charge on Solar” feature to allow Tesla’s home solar customers to charge their EVs in their garage with excess power captured through their solar equipment. In Q1, Tesla announced it would build a megapack energy storage production facility near its existing Shanghai facility. But it’s Musk’s recent move into AI through Tesla’s xAI division that could draw investor questions tomorrow. Critics have wondered if it could be another Twitter-like distraction from Tesla’s core business. 
• What about the consumer? As of June, the New York Fed reported that auto loan delinquencies were at the highest rate since 2009 for drivers aged 18 – 29, but for all age groups under 70, delinquencies were on the rise. Reports have stated the average Tesla buyer is under 40, male, and making more than $100,000 per year. Could a continuation in rate hikes and a slowing job market have an impact on Tesla sales?

SPEEDING UP. For 2023, the Dow Jones U.S. Automobiles Index ($DJUSAU—candles) was up more than 107% by the end of Q2, while EV makers continued jockeying for position. As of June 30, Tesla (TSLA—pink line) shares continued to recover from a nearly 70% slide in 2022 with record deliveries to close the latest quarter. As for Lucid Group (LCID—blue line), support from Saudi Arabian investors helped mute the impact of delivery delays in its luxury sedan line. However, Rivian (RIVN—orange line) continues to struggle with investors despite pulling ahead of Ford in first-half 2023. RIVN’s truck business now faces new pressures from TSLA and Ford. Data source: S&P Dow Jones indices. Chart source: thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Latest consensus

Here’s a review of key numbers to keep in mind as U.S. EV firms report:

Tesla (NASDAQ: TSLA)

Scheduled report date: Wednesday, July 19, after the closing bell

• Expected Q2 EPS (analysts’ consensus): $0.82
• Year-ago EPS: $0.76
• Expected Q2 revenue (analysts’ consensus): $24.48 billion
• Year-ago revenue: $16.93 billion

Could Tesla’s Q3 deliveries beat Q2’s recently announced record totals? Listen for details. And following on Musk’s comments during TSLA’s annual meeting in May, now that the Cybertruck has left the factory, will executives provide an update on the rumored “Project Highland,” better known as a refreshed version of the Tesla Model 3.

Lucid Group LCID

Scheduled report date: Monday, August 7, after the closing bell

• Expected Q2 loss per share (LPS) (analysts’ consensus): –$0.34
• Year-ago LPS: –$0.33
• Expected Q2 revenue (analysts’ consensus): $187.31 million
• Year-ago revenue: $97.34 million

On Monday, Bank of America (BoA) reiterated its neutral rating on Lucid, noting the company’s recent failure to meet production and delivery goals and called demand for the company’s luxury Air sedans “tepid.” Year over year, LCID deliveries were up 107% in Q2 but short of BoA’s forecasts by 36%. The firm said this puts pressure on management to deliver more of its higher-end Sapphire models “to bridge the gap” until its future Gravity SUV model launches in 2024.

Rivian Automotive (NASDAQ: RIVN)

Scheduled report date: Tuesday, August 8, after the closing bell

• Expected Q2 LPS (analysts’ consensus): –$1.41
• Year-ago LPS: –$1.62
• Expected Q2 revenue (analysts’ consensus): $956.38 million
• Year-ago revenue: $364 million

The aforementioned weekend introduction of the TSLA Cybertruck and F’s price cut on its Lightning model now puts pressure on RIVN’s R1T pickup, which is priced at just under $75,000. Though RIVN’s truck clearly outpaces Ford’s on price—TSLA’s pricing on the Cybertruck could be confirmed tomorrow—a Barron’s report Monday indicated that RIVN took away F’s EV truck lead this year with higher deliveries to its customers in both Q1 and Q2. However, if Automotive News’ July 13 report pans out that Kjell Gruner, Porsche’s U.S. chief, is joining RIVN in an undetermined role, it could add a new dimension to territory that’s become even more competitive overnight. 

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