'Much to be excited about': Here's what 4 analysts are saying about Tesla ahead of its 3rd-quarter earnings report
- Tesla is set to release its third-quarter earnings report after markets close on Wednesday.
- The electric-vehicle company already announced record third-quarter production numbers and beat expectations for its deliveries. Analysts on Wall Street are focusing on whether Tesla will meet its 2020 delivery target of 500,000 vehicles.
- Here's what four analysts are saying about the world's highest-valued automaker.
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Tesla is set to release its third-quarter earnings report after markets close on Wednesday. After the electric-vehicle said it produced a record 145,036 vehicles in the third quarter and delivered 139,300 vehicles — beating expectations — Wall Street will be listening for any updates on Tesla's year-end delivery target of 500,000 vehicles.
The focus will also be on Tesla's profit margins. Last quarter marked four consecutive profitable quarters for Tesla, but the company has not been included in the S&P 500. Nevertheless, the stock has been one of the market's best performers this year, up over 400% year-to-date.
Here's what four Wall Street analysts are saying ahead of the world's highest-valued automaker's earnings report.
1. Wedbush Securities
Price target: $500
Rating: Neutral
Wedbush's Dan Ives raised his price target for Tesla to $500 from $475 ahead of the earnings report.
"With Tesla already reporting 3Q deliveries which came in above Street expectations, now all the Street's focus around earnings on Wednesday will be gauging the level of profitability and unit growth trajectory into 4Q," he said.
He added that Tesla's improved manufacturing efficiency and success in its Gigafactory 3 in China would be on display in the call.
Tesla is "on pace to impressively achieve in the area code of 500k units for the year, a line in the sand that was a pipe dream six months ago as Tesla (and other auto players) have navigated this COVID backdrop," Ives said, adding that the trajectory of demand in China would be "front and center" through the end of the year.
"Ultimately this week we view as another step forward for Musk & Co. with healthy demand and profitability emerging out of this dark macro which has been a massive struggle for many of Tesla's peers," he said.
2. Credit Suisse
Price target: $400
Rating: Neutral
Credit Suisse's Dan Levy is estimating earnings per share of $0.73 versus the consensus estimate of $0.54.
Levy said he thought that Tesla's gross margins would be at the center of the earnings beat and that Tesla was likely to maintain profitability and keep its eligibility for the S&P 500 intact.
"Q3 will be Tesla's attempt at showing it can maintain profitability even with credit revenue declining," he said.
Levy said that Tesla's Battery Day event in September demonstrated that the company remained far ahead of others in the "crucial field of batteries." Even if Tesla isn't able to reduce battery costs to its target level, there's still "much to be excited about," because Tesla is "well ahead of the competition" in keeping battery prices low, he said.
Levy expects Tesla to reiterate a 2020 delivery target of 500,000 vehicles. He said that he didn't think Tesla would reach this but that investors would likely look through it because Tesla's "longer-term growth narrative is intact."
3. Goldman Sachs
Price target: $450
Rating: Neutral
Mark Delaney of Goldman Sachs said that the regional distribution of third-quarter deliveries would be a key topic on Tesla's earnings call. Delaney expects Tesla to hit its target of 500,000 deliveries by the end of the year.
Delaney also said he expected the earnings call to include a discussion of products and more details on what's driving the recent price cuts for the Model S and on Tesla's plan to release a $25,000 car in three years.
4. Third Bridge
Nick Shields, a Third Bridge senior analyst, said there would be "intense interest in the Q4 delivery expectations commentary Tesla provides now that Musk has softened his language on exceeding five hundred thousand deliveries for the year."
He added: "People will be looking at the value of Tesla's tax credit sales against their vehicle sales. Over the last few quarters, we understand, Tesla has relied heavily on selling tax credits because they provide large gross margins relative to car sales. There are questions about how long this segment has to grow."