Tesla will release its Q3 earnings report after US stock market hours on Wednesday, which is in stark contrast to the recent hype surrounding its self driving taxis. Wall Street seems to be more focused on the company's automotive business.
Tesla's self driving taxis are still several years away from being launched, and ultimately, most of its revenue and profits still come from car sales. Therefore, it is not surprising that Wall Street hopes to see Tesla return to a growth model in its core automotive business.
Wall Street generally expects Tesla to deliver the same number of cars this year as in 2023. However, due to significant price reductions earlier this year, the company's profit margin has been continuously deteriorating.
Since the beginning of this year, Tesla's stock price has fallen by about 13%, while the S&P 500 index has risen by 22% during the same period. However, some analysts on Wall Street predict that Tesla's upcoming third quarter earnings report will indicate that "the worst is over.
Here are Wall Street's expectations for Tesla's upcoming performance report:
Barclays: Returning to Fundamentals
Barclays analyst Dan Levy stated in a report, "As Tesla's Robotaxi Day passes, we believe that Tesla's focus has at least returned to fundamentals for now
Levy expects Tesla's Q3 earnings per share to be 68 cents, exceeding the market's general expectation of around 60 cents.
Sales are expected to remain the same as last year, and profit margins have already hit a low point, but there will be some improvement. As other OEMs rely on Tesla for compliance, credit income may receive a solid boost. Tesla Energy is achieving steady growth, and as Tesla achieves cost savings through layoffs, operating costs may currently decrease, "he added.
The above factors, coupled with Tesla's stock being sold off after the release of the robot taxi, have convinced Levy that the company's third quarter performance report will be a positive catalyst for the stock.
Besides Tesla discussing profitability and guidance during the conference call, Levy stated that any comments regarding low-cost car plans could potentially impact the stock.
"We will not deny that Tesla may give up the idea of Model 2 (priced at 25000 US dollars) and focus its resources on the launch strategy (autonomous vehicle), which may be regarded as quite negative by stock investors," he added.
Barclays has rated Tesla as' neutral 'with a target price of $220.
Wells Fargo: 'Now it's sales, but in the future, profit margins will decline'
Analyst Colin Langan from the bank stated in a report last week that Tesla announced "disappointing" third quarter deliveries earlier this month, and Wells Fargo expects the company to make up for the sales shortfall by "offering aggressive financial promotions globally.
We estimate that the promotional activities in the third quarter will result in an actual price reduction of about 8%, "he said, adding that he expects the company's performance in the third quarter to be lower than Wall Street's expectations.
Langan expects Tesla's gross profit margin without credit to be 13.6% in the third quarter, lower than the previous quarter's 14.6%.
Wells Fargo has rated Tesla as "underweight" with a target price of $120.
Wedbush: Profit margin will be the focus
Wedbush analyst Dan Ives remains bullish on Tesla's stock, believing that the company should show signs of recovering growth in the third quarter earnings conference call and forward guidance.
In a recent report, he said, "We expect the overall data for the third quarter to be roughly consistent, with a possible slight increase in profit margins, indicating that this key indicator has hit bottom
Ives stated that Tesla should be able to deliver 1.8 million vehicles by 2024 and increase to over 2 million by 2025.
But for Wall Street, perhaps more important than car delivery volume is Tesla's profit margin. Ives said, "Profit margin will be the focus of the conference call
He added that investors will hope to see this key indicator maintain a trend of around 15% in the third and fourth quarters, and reach 20% by 2025. Ives also said that this should alleviate concerns about further stock price declines and make investors believe that the days ahead will be better.
Wedbush has rated Tesla as' outperforming the market 'with a target price of $300.