Tesla (TSLA) Q3 Earnings Preview: EV Giant Faces Scrutiny Amid Market Pressures and Recent Setbacks

TLDR:

• Tesla reports Q3 2024 earnings today with expected EPS of 58 cents on $25.37B revenue
• Stock is down 13% in 2024 and 17% this month following disappointing delivery numbers
• Recent robotaxi event failed to impress analysts and investors
• Automotive gross margins seen as key metric for stock performance
• Company faces increased competition in EV market globally, especially in China

Tesla (TSLA) is set to report its third-quarter earnings after the market close on Wednesday, with Wall Street analysts and investors closely watching several key metrics amid recent challenges. According to analysts polled by LSEG, the company is expected to report earnings of 58 cents per share on revenue of $25.37 billion.

These projections suggest a 12% decline in earnings compared to the same period last year, while revenue is anticipated to show modest growth from the previous year’s $23.35 billion. The company’s previous quarter saw adjusted earnings per share of 52 cents and revenue of $25.50 billion.

The earnings report comes at a crucial time for Tesla, as the stock has experienced significant pressure in recent months. Share prices have declined 13% since the start of 2024 and have fallen 17% in October alone, reflecting growing investor concerns about the company’s market position.

Earlier this month, Tesla reported disappointing third-quarter delivery numbers, adding to market anxiety. The delivery miss has highlighted challenges the company faces in an increasingly competitive electric vehicle market, where both traditional automakers and new entrants are gaining ground.

In China, Tesla continues to face mounting pressure from local competitors such as Li Auto and newer entrants like Geely. This intensifying competition in one of the world’s largest EV markets has become a key concern for investors and analysts alike.

The company’s recent robotaxi event, which was expected to be a catalyst for positive momentum, failed to meet market expectations. JPMorgan analyst Ryan Brinkman noted “substantial risk of multiple compression” following what he described as an “underwhelming robotaxi day.”

Wall Street analysts are particularly focused on Tesla’s automotive gross margins, which many view as a critical metric that could significantly impact the stock’s post-earnings performance. Piper Sandler analyst Alexander Potter has warned investors to prepare for potential “choppy” trading if this figure doesn’t show improvement over the previous quarter.

The company is also facing increased scrutiny regarding its plans for an affordable EV model priced under $30,000, with investors seeking more specific details about this initiative. This comes as the broader EV market continues to evolve and price competition intensifies.

Analysts’ opinions on Tesla’s stock remain mixed. Of the 19 analysts tracked by Visible Alpha, nine maintain “buy” ratings, seven hold “hold” ratings, and three have issued “sell” recommendations. The average target price stands at $224.89, slightly above recent trading levels.

Jefferies analyst Philippe Houchois recently adjusted his price target to $195 from $165, though this still implies more than 10% downside from current levels. Houchois noted that while Tesla remains innovative, it appears to be operating like “an imbalanced VC portfolio solely funded by an auto business under pressure.”

Barclays analyst Dan Levy suggests that a third-quarter earnings beat and margin improvement could serve as potential near-term catalysts for the stock, though he maintains that the longer-term outlook remains uncertain. Levy has kept an equal weight rating with a $220 price target.

Cantor Fitzgerald’s Andres Sheppard anticipates that Tesla may provide additional details about its robotaxi plans during the earnings call, following the recent event that left many questions unanswered. Sheppard maintains a neutral rating on the stock.

The company is expected to report net income of $1.69 billion, down from $1.85 billion in the same quarter last year, according to Visible Alpha estimates. Revenue is projected at $25.43 billion, showing growth from $23.35 billion in the year-ago period.

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