Tesla (NASDAQ:TSLA) faces a challenging Q3 earnings report, as the stock’s recent volatility and downward trend have raised concerns among investors.
Despite some recent improvement, TSLA stock is facing challenges today, likely due to the Q3 deliveries report. Currently, it’s down nearly 2% at the time of writing on a volatile day of trading, indicating investors remain cautious on this name heading into its earnings print. Given recent disappointing deliveries numbers, a negative earnings report appears to be widely expected.
The following expectations for October 18, as well as other updates, will give you needed insight about Tesla.
What the Analysts Expect to See
TSLA stock is dropping, and Wall Street analysts are growing more pessimistic. JPMorgan’s Ryan Brickman maintains a “sell” rating with a $135 target, implying a 45% downside. Goldman Sachs’ Mark Delaney lowered the target to $252, rating it a “hold”. William Stein of Truist Financial suggests a “hold” with a $243 target.
Toni Sacconaghi of Bernstein remains bearish with a “sell” rating and a $150 target. Specifically, he cited concerns about Tesla’s auto gross margins, lower volumes, discounts, weak demand, and a lack of new offerings. These combined reasons could potentially require price cuts next year.
Moreover, Sacconaghi suggests Tesla must excel in Q4 and possibly lower prices to meet 2023 delivery targets, impacting 2024. Despite adjusted forecasts, recent delivery shortfalls raise concerns. Lowered price targets before earnings indicate skepticism.
Deliveries Numbers Don’t Inspire Confidence
On October 2, Tesla reported Q3 deliveries of just over 435,000 vehicles, missing Wall Street estimates by over 20,000 and down about 6% from Q2. TSLA attributed this drop to “planned factory upgrades,” maintaining its full-year delivery estimate. Despite an initial dip in share price and increased short interest, the stock remained relatively stable after the report, likely due to two factors.
Rivian, Tesla’s competitor, saw a significant surge in its stock today due to better-than-expected Q3 production figures. J.D. Power reported that Q3 U.S. auto sales were up 17% year over year (YOY). This indicates ongoing demand despite economic concerns and rising interest rates. Worker strikes affecting the “Big 3” automakers could limit their supply, potentially benefiting competitors like Tesla.
Tesla’s stock rally may be due to two reasons. First, its rival Rivian impressed investors with strong Q3 production figures. Second, despite concerns about rising interest rates, recent data shows continued demand for car sales, benefiting companies like Tesla. Additionally, a slight drop in long-term Treasury bond yields has relieved pressure on growth stocks like Tesla.
What Now
Tesla’s Q3 delivery performance could indicate factory issues or demand concerns. The stock remains polarizing. Optimists are anticipating profitable growth. And pessimists are pointing to Tesla’s high valuation and rising competition as reasons to avoid the stock. Indeed, the company’s upcoming earnings report will help to clarify the situation.
Electric vehicle growth has slowed, and Tesla’s high valuation demands innovation to maintain its price. With a price-earnings ratio of roughly 75-times, the company faces challenges in convincing a broader audience to adopt electric vehicles. Despite skeptics, Tesla has a history of defying expectations, likely leading to ongoing stock volatility.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
