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All eyes will be on Tesla's profitability picture when it releases earnings today. Here's what Wall Street analysts are saying ahead of the report.
All eyes will be on Tesla's profitability picture when it releases earnings today. Here's what Wall Street analysts are saying ahead of the report.
Daniel StraussOct 23, 2019, 17:58 IST
Reuters / Rebecca Cook
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Tesla is set to report earnings for the third quarter after the closing bell on Wednesday.
Investors are expected to approach the results with caution after the electric automaker reported disappointing vehicle production numbers earlier this month.
There will also be a focus on margins as the company struggles to climb back to profitability.
Here's what Wall Street analysts are saying ahead of Tesla's third-quarter report.
Tesla is scheduled to release third-quarter earnings after the market close on Wednesday, and investors will be keen to see how close the automaker is to returning to profitability.
Wall Street is expecting Tesla to post a roughly $52 million loss on $6.45 billion in revenue for the period. During the same quarter last year, the company reported a profit of $343 million on $6.82 billion in sales. Tesla last reported a profit in the fourth quarter of 2018.
Some analysts are warning this quarter's results might not be pretty following disappointing vehicle production data reported earlier this month.
Tesla said it produced 96,155 vehicles and delivered 97,000 during the third quarter. That set a company record, but still fell at the low end of consensus analyst estimates ranging from 95,000 to 100,000.
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The news sent shares falling about 7% as investors grew concerned the company might miss its ambitious goal of delivering between 360,000 and 400,000 cars in 2019.
The combination of profitability and delivery concerns has weighed heavily on the stock this year. Shares were down 23% year-to-date through Tuesday's close, compared to the S&P 500's gain of close to 20% over the period.
Wednesday's results will be critical for the company to prove to investors it can shrink losses and meet delivery targets.
Here's what Wall Street analysts are saying about Tesla's path to profitability and delivery estimates ahead of its third-quarter earnings report:
Credit Suisse: "Tesla is likely to post its first y/y negative revenue growth quarter since 2012."
Price target: $189
Rating: Underperform
"Tesla is likely to post its first y/y negative revenue growth quarter since 2012, and we expect gross margins down modestly sequentially," Credit Suisse analyst Dan Levy wrote in a note to clients in early October.
Levy added: "Post the deliveries release, we revise our 3Q y/y revenue growth estimate to -8%."
JPMorgan: "We remain cautious on shares of Underweight-rated TSLA."
Price target: $200
Rating: Underweight
"We remain cautious on shares of Underweight-rated TSLA on lofty valuation coupled with high investor expectations, high execution risk, and the potential for a pending cut to full-year delivery guidance at the time of 3Q earnings," JPMorgan analysts wrote in a note to clients on October 18.
Wedbush: "We continue to believe the biggest overhang around the story is the ability to hit profitability."
Price target: $220
Rating: Neutral
"We continue to believe the biggest overhang around the story is the ability to hit profitability and achieve its ambitious unit guidance for 2019 of 360k to 400k units," Wedbush analyst Daniel Ives wrote in a note to clients on October 18.
Ives continued: "Balancing the ability to hit these goals with a profitable business model remains the crux of the story for Tesla as gross margins (driving 20%+ GM key) need to tick up despite selling a markedly lower priced Model 3 vehicle going forward."
Roth Capital: "Tesla's weak 3Q19 is already telegraphed."
Price target: $224
Rating: Neutral
"The 3Q19 deliveries number was a miss, so we think investors need to carefully analyze pressures causing weakness," Roth Capital analysts wrote in a note to clients on October 22.
They added: "Tesla's weak 3Q19 is already telegraphed. With the 97k deliveries in the quarter, below our 105k estimate, both revenue and EPS should be light."
Macquarie: "With some seasonal tailwinds, we believe achieving the lower end of its 360-400k for the year as feasible."
Price target: $400
Rating: Outperform
"With some seasonal tailwinds, we believe achieving the lower end of its 360-400k for the year as feasible," Macquarie analysts wrote in a note to clients on October 22.
The analyst added: "We will look for an update on the feasibility of Mr. Musk's 2,000 unit/week production target for 2019 year end. In addition, we will watch for any indication of a potential pull forward of Model Y launch in 2020."
