'Tesla could be in the midst of a strategic pivot': Here's what Wall Street expects from the EV maker's 3rd-quarter earnings report

• Tesla is scheduled to report third-quarter earnings on Wednesday after the market close.
• Investors are focused on the company's profit margins and demand outlook after a series of price cuts and weaker-than-expected Q3 deliveries.
• Here's what Wall Street expects from the EV maker's upcoming earnings report.

All eyes are on Tesla as it is scheduled to report its third-quarter earnings results on Wednesday after the market close.

Wall Street analysts are focused on the company's gross margin levels after it implemented several price cuts, as well as any commentary on its outlook for demand in both the US and in China.

The EV maker already reported third-quarter deliveries of 435,059, which was below Wall Street expectations of 451,000 vehicles. Tesla said downtime at its factories in Shanghai and Dallas led to a slight decline in vehicle production during the quarter.

From an earnings perspective, here's what Wall Street expects from Tesla, according to data from Bloomberg:

• Revenue: $24.9 billion
• Adjusted earnings per share: $0.91 per share
• Gross margins: 18.2%

Other items that will be on watch by investors is any update related to the company's planned launch of its Cybertruck, the impact its vehicle price cuts have had on demand, and the earnings potential of its EV charging network after it struck deals with a slew of automakers, among other things.

Here's what Wall Street analysts are saying about Tesla's upcoming third-quarter earnings report.

Wedbush: "Margins and guidance a focus after a choppy delivery number"

Wedbush analyst Dan Ives said that while Tesla disappointed investors with its choppy third-quarter delivery number, it sees "better days ahead" in the fourth-quarter and 2024.

"With the vast majority of price cuts now in the rear view mirror and the factory shutdowns/upgrades completed we believe gross margins should expand from these levels with 3Q marking a trough period," Ives said in a recent note. "A major topic on the conference call will be the Model 3 refresh and overall demand trends Tesla is seeing globally."

Wedbush reiterated its "Outperform" rating and $350 price target, representing potential upside of 38%.

RBC: "Tesla is like Netflix"

RBC said Tesla is nearing a strategic pivot, similar to Netflix when it shifted from low-margin DVDs to a high-margin streaming business.

"Our view is that Tesla could be in the midst of a strategic pivot from making cars to becoming a Tier 1 supplier. For Tesla's pivot, we see charging infrastructure, batteries, and drive units as being key in gaining access to OEMs as customers," RBC said in a recent note.

The bank highlighted that for Tesla to hit its 2023 delivery target of 1.8 million vehicles, it would have to deliver 476K units in the fourth-quarter.

"This would require production to quickly return to normal levels," RBC said.

RBC reiterated its "Outperform" rating and $305 price target, representing potential upside of 20%.

JPMorgan: "Modest miss is after the goal posts had been moved considerably"

JPMorgan said in a recent note that Tesla's third-quarter delivery miss is a lot bigger relative to Wall Street analyst estimates from a year ago. Analyst's Q3 delivery expectations at the start of the year was 485,000 vehicles, and was 550,000 vehicles in June 2022.

"While this represents a fairly material reset of expectations, actually the decline in deliveries outlook is the least meaningful of expectation resets for Tesla this year because it has come despite large declines in average selling price which have exacerbated the impact of the volume shortfall on all other performance metrics," JPMorgan said.

JPMorgan reiterated its "Underweight" rating and $135 price target, representing potential downside of 47%.

Goldman Sachs: More price cuts are possible

Goldman Sachs said in a note that Tesla investors are likely to shift their focus towards the demand impact of the expected Model 3 refresh, as well as the launch of the Cybertruck.

"To what extent can new models help drive stronger volumes in 4Q23 and 2024? Consensus, per Visible Alpha Consensus Data, is at 499K in 4Q and 2.358 mn in 2024. We model a pick-up to 494K in 4Q and 2.275 mn in 2024," Goldman said.

The bank also highlighted that Tesla will benefit from lower costs in 2024, "although we believe that it may further lower prices to drive volume next year and mitigate margin improvement."

Goldman Sachs rates Tesla at "Neutral" with a $265 price target, representing potential upside of 4%.

Bank of America: Cut estimates on lower deliveries and price cuts

Bank of America believes investors' focus will squarely be on Cybertruck updates, profit margins and the potential for future price cuts, ongoing efforts to reduce costs, and general commentary on demand for electric vehicles.

"We cut our third-quarter estimate to reflect lower deliveries than our prior forecast and for price changes during the quarter," Bank of America said. The bank lowered its third-quarter earnings per share estimate to $0.65 from $0.75, compared to GAAP EPS estimates of $0.78.

Bank of America rates Tesla at "Neutral" with a $300 price target, representing potential upside of 17%.