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Tesla (
NASDAQ:TSLA
) earnings are today, with the
electric vehicle (EV) maker scheduled to announce its
second-quarter results after the market closes. Tesla impressed investors with
upbeat Q2 deliveries, thanks to price cuts that aimed to boost demand and make its EVs affordable to receive tax credits under the Inflation Reduction Act. However, several analysts are concerned about the impact of these price cuts on Q2 margins and the stock’s high valuation following a 136% year-to-date rally.
Expectations Ahead of Tesla’s Q2 Earnings
Tesla produced 479,700 vehicles in the second quarter. It delivered 466,140 units in Q2, marking an 83% year-over-year jump and a 10% rise from the prior quarter.
Analysts expect the company’s Q2
revenue to rise more than 43% year-over-year to $24.3 billion. The company’s
adjusted EPS is projected to rise about 4% to $0.79, as lower margins are expected to offset the robust growth in revenue.
On Monday,
Wells Fargo analyst Colin Langan raised his price target on Tesla to $265 from $170 but maintained a Hold rating. The analyst expects Tesla’s Q2 gross margin to decline to 17.5%, reflecting continued price cuts and a weaker mix. He anticipates Q2 EPS coming in at $0.75.
Langan also highlighted the 68% rise in the stock over the last two months due to better-than-anticipated Q2 deliveries,
multiple deals by Tesla to share its charging network with rival EV makers, reports about Model 2 launching by the end of 2024, and Model 3 SR qualifying for full EV tax credits. That said, Langan is concerned about Tesla's Q2 auto margin due to price cuts and is also concerned about volumes heading into the second half of the year.
Meanwhile,
Barclays analyst Dan Levy thinks that Tesla has a “tough set-up” heading into the Q2 earnings, as momentum in the stock has outweighed fundamentals. Like several other analysts, Levy also believes that Tesla’s Q2 auto gross margin will be the “key focal point.” He projects Tesla’s auto gross margin declining by 150 basis points quarter-over-quarter to 17.5%.
Levy sees the stock moving higher if Tesla reports flat margins and management commentary indicates that Q2 is the trough for margins. Conversely, he cautioned that the stock could go down if there are indications of persistent margin weakness. Levy reiterated a Hold rating on Tesla with a price target of $260 last week.
Technical Indicators Ahead of TSLA's Q2 Earnings
Ahead of the Q2 earnings release,
technical indicators reveal that Tesla is a Buy. According to TipRanks’s easy-to-understand technical tool, TSLA’s 50-Day EMA (exponential moving average) is 236.19, while its price is $290.38, making it a Buy. Further, TSLA’s shorter duration EMA (20-day) also signals an uptrend.
TipRanks’ Website Traffic Tool Insights
According to TipRanks’ Website Traffic Tool,
visits to tesla.com and shop.tesla.com were up 19% year-over-year in the second quarter, which bodes well for the Q2 revenue growth. However, it is important to note that website visits were up only 1.8% in Q2 compared to the first quarter of 2023.
Is Tesla Stock a Buy, Sell, or Hold?
Wall Street is sidelined on
TSLA stock, with a Hold consensus rating based on 12 Buys, 13 Holds, and five Sells. The average price target of $237.50 indicates a possible downside of 18.2% from current levels.
Conclusion
Tesla shares have enjoyed an impressive rally this year, driven by multiple factors including Q1 performance, Q2 deliveries, and deals involving the company’s Supercharging network with the likes of Ford (
NYSE:F
), General Motors (
NYSE:GM
), and Rivian (
NASDAQ:RIVN
). Nonetheless, analysts are focused on the impact of the price cuts on the Q2 gross margin.
Disclosure
General Motors (NYSE:GM) is expected to publish its Q2 2023 results on July 25, reporting on a quarter that saw the company’s U.S. deliveries continue to witness strong gains. We expect revenue for the quarter to come in at about $42.3 billion, slightly ahead of consensus e
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