TSLA-Enhanced Rally Ignores Sellers While Cybertruck Takes Centre Stage. Tesla (TSLA) will release its financial results for the second quarter on Wednesday night amid margin concerns. Analysts anticipate vehicle price cuts and discounts will drive gross margins well below the 20% “floor” Tesla has historically targeted. The price of TSLA shares increased marginally on Wednesday morning.
Before the company’s late-Wednesday earnings report, Tesla stock was poised for its ninth gain in the past ten weeks, despite Cathie Wood and Ark Invest’s aggressive selling. In the meantime, one analyst risked an earnings day upgrade as new car registrations in the European Union rose 17.8% in June.
Wednesday, Fubon analyst Josephine Hsieh upgraded TSLA from neutral to buy, even though several analysts had cautioned ahead of Tesla’s earnings. Hsieh has a price target for Tesla stock of 330, approximately 12% above Tuesday’s closing price.
However, Wedbush analyst Daniel Ives, a longstanding Tesla bull, tweeted on Wednesday that auto gross margins are “key” to Tesla’s report. Cathie Wood disposed of more than 73,000 Tesla shares in consecutive trading sessions this week before Wednesday’s electric vehicle titan’s second-quarter earnings release.
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Cybertruck Sends Tesla Stock Higher
Tesla tweeted a photo of the first Tesla Cybertruck produced at its Austin facility over the weekend, just four days before its quarterly earnings report. On Monday, Tesla stock responded by increasing 3.2% to 290.38.
On Tuesday, a Morgan Stanley analyst, Adam Jonas wrote that “now that the first Cybertruck has rolled off the assembly line in Texas, the fun can begin.”
Regarding the Cybertruck, “investors will be listening for any potential information on the new release during Wednesday’s earnings call,” Jonas said.
Last week, TSLA stock rose 2.5% to 281.38, reaching a new intraday high for 2023 Friday. In 2023, Tesla is up 128 percent. According to MarketSmith analysis, shares are approaching a 313.80 purchase point due to a prolonged consolidation that began in late September.
Tesla Stock: Expectations for Q2
The EV company releases its financial results for the second quarter after Wednesday’s market close. Analysts anticipate a 4% increase in profits to 80 cents per share. Wall Street expects revenue of $24.22 billion, up 43% from the previous year.
Investors will await news of an impending Model 3 upgrade. Also interesting are reports regarding a future facility in Mexico that will manufacture Tesla’s next-generation vehicle. Musk has merely alluded to the next-generation model.
Naturally, investors will want to know when Tesla Cybertruck production and meaningful deliveries will commence.
Early in July, TSLA reported record global deliveries as price cuts, tax credits, and discounts drove demand well beyond Wall Street’s expectations.
Second-quarter deliveries of Tesla vehicles reached 466,140, eclipsing Q1’s record of 422,875 and Q4’s total of 406,140. Model 3 and Y deliveries reached 446,915 in Q2. Model S and Model X deliveries rose to 19,225. Despite Tesla limiting output to below capacity, production reached 479,700 units, again exceeding deliveries.
Analysts Approaching Earnings With Caution
Monday, Wells Fargo analyst Colin Langan increased the price target for Tesla shares from $170 to $265 while maintaining an equal-weight rating. The target is roughly 10% below Tuesday’s closing price.
Langan wrote on Monday that while Tesla exceeded Q2 delivery volume estimates, Wells Fargo is still determining how price reduction may have impacted Q2 auto margins for Tesla. Concerning is the fact that production volumes will exceed demand in the second half of 2023.
Langan wrote on Monday that Wells Fargo expects Tesla’s gross margin on automobiles to decline to 17.5% due to continued price cuts and a weaker mix. However, Tesla surpassed Q2 delivery volume estimates.
Ives wrote on Monday, “Margins, margins, margins,” in a note.
Tesla should be able to beat Wall Street’s Q2 estimates, according to Ives, but the focus will be on auto gross margins “to gauge the impact of price cuts and what this means for margins going forward.”
The Wedbush analyst predicted that auto gross margins would be approximately 17.5%. However, Ives added that gross margins “should recover over the next few quarters and return to 20% by 2024.”
Citigroup increased its price target for Tesla shares from $215 to $278 last week. Itay Michaeli maintained a neutral recommendation on TSLA. He anticipates a “neutral-to-slightly negative” setting for Tesla’s Q2 report. Michaeli remains concerned about the impact of price reduction on margins.
On Tuesday, Jonas joined the chorus of analysts who emphasized the importance of margins. The Morgan Stanley analyst stated that estimates for Tesla’s Q2 gross margins range from 16% to 20%.
“We are relatively cautious about the outlook for earnings revisions but expect the company to highlight its AI capabilities,” Jonas said.
Revenue fell In Q1.
Tesla reported a significant decline in first-quarter earnings and revenue on April 19. In the first quarter of 2023, the global EV giant’s profit margins fell below 20% as the company implemented an aggressive price-cutting strategy.
The EV manufacturer’s total gross profit was $4.5 billion. The gross profit margin for Tesla was 19.3% in the first quarter, down from 23.8% in the fourth quarter and 29.3% a year earlier.
Gross automobile margins, excluding regulatory credits and leases, fell from 23.3% to 18.3% in the fourth quarter. This remains below the gross margin “floor” of 20% that Tesla had previously aimed for.
IBD’s automaker industry group positions Tesla shares third. It has a 98 out of 99 Composite Rating. Tesla has a 96 Relative Strength Rating and a 93 out of 99 EPS Rating.