Tesla (TSLA) is scheduled to report third-quarter 2021 earnings on October 20, after the market closes. In the past year, shares of the electric vehicle behemoth have ballooned almost 102% and are currently trading at over $870. A strong earnings print could boost investors’ confidence, so let’s take a closer look at what analysts on the Street are expecting.
Earnings PreviewTesla EPS is expected to be $1.49 on revenues of $13.15 billion in the third quarter. Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $1.65 per share.
Prior Period ResultsIn the previous quarter, the company reported adjusted earnings of $1.45, which almost doubled compared to the prior-year quarter. That said, the result topped the consensus estimate of $0.96. In addition, revenue jumped 98% to $11.96 billion and surpassed analysts’ expectations of $11.21 billion. (See Tesla stock charts on TipRanks)
Markedly, Tesla’s results history depicts strong performance over the past four quarters, with upbeat revenues in all, and an earnings miss in just one of the four quarters.
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Factors To Watch Out For at TeslaThis dominant player in the electric vehicle market, which boasts a unique product design, posted its eighth profitable quarter for the April-June period. Despite supply chain challenges, particularly global semiconductor shortages and port congestion, Tesla exceeded $1 billion of GAAP net income for the first time in its history.
The trend is expected to continue in the to-be-reported quarter, as the company experienced high demand for vehicles in the third quarter as well. This was due to the rising popularity of green vehicles, changing customer preferences post the pandemic outbreak, and vaccination-driven gradual economic recovery. The company said, “With global vehicle demand at record levels, component supply will have a strong influence on the rate of our delivery growth for the rest of this year.”
In the third quarter, Tesla delivered 241,300 units, which rose from the 139,300 deliveries in the same quarter last year and the 201,250 vehicles delivered in the prior quarter.
Cost-management remains the priority for Tesla, the positive impact of which can be expected in the results. Specifically, the company is continually working on lowering costs and increasing its rate of production to make available electric vehicles to as many people as possible.
During the last earnings call, management commented, “We successfully launched Tesla Vision in Q2, which was mainly possible due to our ability to use data from over a million Tesla vehicles to source a large, diverse, and accurate dataset.”
Vehicle sales for the automaker ramped up in the to-be-reported quarter, as escalating demand for Model 3 and Y was visible. Markedly, in the third quarter, the Model 3/Y unit vehicle deliveries of 232,025 nearly doubled on a year-over-year basis, while increasing 16.4% sequentially.
Over the coming years, management expects to achieve 50% average annual growth in vehicle deliveries.
In the Q2 press release, Tesla said, “We believe we remain on track to build our first Model Y vehicles in Berlin and Austin in 2021. The pace of the respective production ramps will be influenced by the successful introduction of many new product and manufacturing technologies, ongoing supply-chain related challenges and regional permitting. To better focus on these factories, and due to the limited availability of battery cells and global supply chain challenges, we have shifted the launch of the Semi truck program to 2022. We are also making progress on the industrialization of Cybertruck, which is currently planned for Austin production subsequent to Model Y.”
Additionally, Tesla’s Solar Roof and Powerwall products are expected to have aided growth for solar and energy storage deployments in the third quarter.
Analyst RecommendationsPrior to the third-quarter Tesla earnings report, Wedbush analyst Daniel Ives has maintained a Buy rating and a price target of $1,000 (18.62% upside potential) on the Tesla stock.
Ives anticipates another beat in the third quarter.
The analyst said, “We believe the current supply chain issues has taken roughly 40,000 cars off the annual numbers for Tesla and despite this dynamic, we believe Musk & Co. should be near the ~900,000 mark for 2021 with a 1.3 million/1.4 million unit bogey for 2022.”
Another analyst, Credit Suisse’s Dan Levy, reiterated a Hold rating and a price target of $800 (5.1% downside potential).
Levy stated, “We raise ’21e EPS to $6.65 from $5.75. Downside risks: increased competition, misexecution on growth plans. Upside risk: increased EV uptake, growth in non-auto biz.”
Overall, the stock has a Hold consensus rating based on 12 Buys, 7 Holds, and 7 Sells. The average Tesla price target of $699.81 implies 18.9% downside potential from current levels.
Website TrafficAccording to SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, globally, the Tesla website recorded a 15.7% monthly fall, year-over-year, in visits in September, while Q3 depicted a 6.39% quarter-to-date decline. Markedly, year-to-date growth in website visits this year, compared to year-to-date growth in website visits in the previous year, came in at 3.54%. (See Tesla’s website traffic on TipRanks)
Risk AnalysisInvestors should always be aware of the risks involved in any stock. According to the new TipRanks’ Risk Factors tool, Tesla is at risk mainly from three factors: Finance and Corporate, Production, and Legal and Authority, which contribute 31%, 26%, and 17%, respectively, to the total 42 risks identified for the stock. Within the Finance and Corporate risk category, TSLA has 13 risks, details of which can be found on the TipRanks website.
Disclosure: At the time of publication, Priti Ramgarhia did not have a position in any of the securities mentioned in this article.
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Tesla (TSLA) is the electric vehicle (EV) pioneer, on this there is no debate. However, with legacy auto makers realizing electric vehicles are the future, common wisdom dictates Tesla is set to face increasing competition from the old timers.
This notion is given short shrift by Jefferies' Philippe Houchois.
“For some time the narrative has been legacy OEMs closing the gap; we see little evidence as Tesla continues to challenge at multiple levels,” the 5-star analyst said. “We raise EBIT and margin estimates in contrast with doubts about earnings momentum across legacy OEMs.”
Following additional analysis of Q3 data and based on “various sources” of information concerning the soon-to-be launched Berlin factory, Houchois has increased 2022-23 EBIT estimates by 7-9% on higher “capacity ramp and sustained demand.” With the expectation of 1.3-1.7 million units in 2022-23, the analyst also raised the 2022-23 revenue estimates by c.6% on “higher auto deliveries.”
Houchois’ reasoning is based on the new Austin and Berlin facilities’ production rate coming in at the “the low end of guided 5-10k units/week.” This should result in a “solid” production rate of 200,000 to 250,000 of actual units in 2022, and in one year should see the company attain capacity of “at least” 500,000 units to reach 1.6 million in total.
And despite a still "immature" production network with cross continent shipping making up around 20% of total production, year-to-date Tesla has delivered “slightly” more units than produced. “Localizing production,” says Houchois, “Should improve delivery timing and associated transit costs.”
The analyst also believes any concerns about soft demand in China can be put to rest following Q3’s delivery numbers, while the supply disruptions felt across the globe have affected Tesla too, but it has “out-performed peers in sourcing semi-conductors.”
As such, Houchois lifted his price target on Tesla stocks to $950 (from $850), suggesting shares have room for a 9% uptick in the year ahead. No need to mention, Houchois’ Buy rating stays as is. (To watch Houchois’s track record, click here)
But as ever with Tesla, the Jefferies analyst’s take is one of many varied ones on Wall Street. While 11 other analysts join Houchois in the bull camp, with an additional 7 Holds and Sells, each, the analyst consensus deems TSLA stock a Hold. Moreover, the average price target is resolutely bearish; at $699.81, the shares are anticipated to be changing hands for ~20% discount a year from now. (See Tesla stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.