Tesla (TSLA, Financial) is set to release its third-quarter financial results, with analysts predicting that ongoing challenges in the automotive industry could pressure the company's profit margins. Wall Street expects Tesla's revenue to reach $25.46 billion, marking a 9% year-over-year increase, while earnings per share (EPS) are projected to fall by 9% to $0.60. This anticipated decline in profitability is largely attributed to shrinking margins as Tesla has reduced prices in key markets to navigate increased competition and broader industry challenges.
Over the past three months, Tesla’s stock price has dropped by 13%. A strong earnings report with healthy profit margins could potentially boost the stock. Despite this, recent reports have shown Tesla underperforming due to disappointing production numbers and market reactions to its much-anticipated Robotaxi unveiling.
In terms of vehicle deliveries, Tesla reported delivering 462,890 units in the third quarter, up 6% from the previous year but slightly below analysts' expectations of 463,310 units. High macroeconomic pressures, particularly elevated interest rates, have impacted car sales, especially for customers using financing options.
Tesla's broader strategic shift towards autonomous taxis and humanoid robots might also be influencing its production numbers. The long-awaited Robotaxi event, although delayed multiple times, finally took place, marking a significant moment for Tesla's future growth strategy. However, the market response was subdued due to a lack of detailed information.
CEO Elon Musk announced plans to begin producing a Cybercab autonomous taxi by 2027, priced below $30,000, although he acknowledged the ambitious timeline. Despite skepticism over the feasibility of these promises within the proposed timeframe, anticipation around Robotaxi has elevated Tesla's stock price from around $140 to over $260 this year.
Looking ahead to Tesla's earnings report, attention is likely to shift towards the company's profitability, especially in the context of recent aggressive pricing strategies. Analyst Gordon Johnson from GLJ Research expects Tesla's gross margin to fall to 15%, down from 18% in the prior quarter, amid intensified competition.
Nonetheless, there could be positive developments, particularly in energy storage, where significant growth is evident. Tesla deployed 6.9 GWh of storage in the third quarter, a 72.5% increase compared to 4 GWh in the same period last year.
During the earnings call, any insights from Musk on large-scale financing and production strategies for Robotaxi and the Optimus humanoid robot could positively impact Tesla's stock. Analysts' consensus for Tesla's third-quarter results includes a revenue of $25.46 billion, a 9% year-over-year increase, with EPS of $0.60, a 9% decline.
Currently, among the 35 analysts tracking Tesla stock, 11 have a "buy" rating, 16 recommend "hold," and 8 suggest "sell." The average target price stands at $207.83, implying a potential downside of 5.63% over the next 12 months.
