On the heels of an impressive year for Tesla (NASDAQ:TSLA) investors, with Tesla stock doubling in value, the electric vehicle (EV) giant is poised to reveal its Q3 earnings after the market closes on October 18th. Notably, Tesla’s performance has outshone not just the Nasdaq Composite but also its EV competitors.
Wall Street analysts are forecasting an 8.8% year-on-year increase in Tesla’s revenues, reaching $26.4 billion in the third quarter. However, per-share earnings are expected to decrease by nearly a third during this period.
As Tesla prepares to unveil its Q3 earnings, both bullish and bearish investors have reasons to be attentive. Here are the six critical aspects to keep an eye on in the forthcoming earnings report from Elon Musk’s brainchild.
Margin and Price Cut Commentary
Earlier this year, Tesla made it clear that it would prioritize expanding its deliveries over profit margins. The resultant price cuts, however, have compressed margins significantly, causing operating margins to plunge to 9.6% in Q2 2023. While this still stands as one of the highest in the industry, it’s less than half of its peak levels. During the Q3 earnings call, analysts will be closely monitoring the progress in Tesla’s margins and any insights management provides regarding future price cuts and margin expectations.
Tesla’s Advertising Strategy
Tesla has traditionally shied away from advertising its vehicles, even after Elon Musk hinted at the possibility of advertising during a shareholder meeting in May. With Tesla’s deliveries consistently falling short of expectations in 2023, the company might elaborate on its advertising strategy during the Q3 earnings call. Gary Black, the managing partner at The Future Fund LLC and a Tesla shareholder, also advocates for advertising Tesla’s cars instead of slashing prices.
Delivery Guidance
Tesla has upheld its 2023 delivery guidance of 1.8 million vehicles. However, as the year draws to a close, it becomes crucial to monitor the 2024 guidance. Tesla aims for deliveries to grow at a compound annual growth rate (CAGR) of 50% in the long term, but the growth fell short of that mark in 2022. Examining the commentary on Cybertruck production and delivery timelines is essential, as this model is behind schedule, and its launch would expand Tesla’s market reach and shipment numbers.
New Tesla Models and India Factory Speculation
Tesla has been teasing a low-cost vehicle platform, yet details about this ambitious endeavor are sparse. The market eagerly anticipates commentary on this project during the Q3 earnings call. Additionally, rumors about Tesla considering India for its next factory location are gaining traction, driven by Elon Musk’s admiration for Indian Prime Minister Narendra Modi and India’s ascent as a manufacturing hub. The earnings call might provide insights into Tesla’s plans for India.
Chinese Demand Environment
Despite a warm reception in China, Tesla has faced growing complexities in its operations there, particularly regarding expanding its presence. Musk has denied any “demand issue” in China, but sales in the country dipped nearly 11% year-on-year in September, despite an overall increase in new energy vehicle (NEV) sales. The earnings call may offer insights into the demand landscape in China and the competitive dynamics.
Autonomous Car Timeline
During Tesla’s Q1 2023 earnings call, Elon Musk predicted full autonomy for Tesla cars by the end of 2023, a forecast he has reiterated over the years. As 2023 nears its conclusion, Musk’s updated perspective on the timeline for full autonomy will be closely watched. Autonomy is a pivotal factor in Tesla’s valuation, and Musk has acknowledged its significance.
Tesla Stock Could Hit $2,000 by 2027
Cathie Wood, one of Tesla’s most prominent proponents, believes the company is an artificial intelligence (AI) play, forecasting Tesla stock to reach $2,000 by 2027 in the base case and $2,500 in the bull case. Wood’s optimism revolves around Tesla’s autonomous driving business, which she believes contributes significantly to the company’s value. ARK Invest even foresees Tesla generating around $200 billion in revenues from robotaxis by 2027.
Conversely, Wall Street analysts have tempered their earnings estimates for Tesla due to underwhelming deliveries and a price war that is impacting not only Tesla’s margins but also its competitors. The upcoming earnings call offers an opportunity for Tesla to reassure the market about its long-term growth prospects amid mounting competition.
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