As Tesla prepares to release its quarterly earnings on Wednesday, investors are on high alert, especially after the recent letdown surrounding its robotaxi event. Here are the three crucial indicators to watch that could signal whether Tesla’s stock will break out of its current stagnation or continue to struggle.
1. Margins: Are They on the Upswing or Downward Spiral? 📉🔻
Focus on Auto Gross Margin
Investors should keep a keen eye on Tesla’s auto gross margin, particularly excluding regulatory credits. This figure is vital for understanding the health of Tesla’s core automotive business, which drives the bulk of its revenue.
- Current Concerns: Margins have been in a steady decline over the past two years, and analysts are worried that the second-quarter figure of 14.6% may not mark the bottom. If margins don’t improve, Tesla’s stock could face significant headwinds in the coming months.
- Expectations: Wedbush Securities’ analyst Dan Ives anticipates a much-needed rebound in gross margins in this report. If the margin doesn’t show signs of improvement, the market sentiment could sour, particularly with the current valuation standing at 72 times the consensus earnings per share for next year.
We’re less than an hour away from Tesla’s earnings report. Again, I firmly believe in believe that Wall Street is only concerned about Energy numbers – it’s what’s hot right now and what has huge growth. Obviously, they’ll care about a miss on EV sales or compressed margins but… pic.twitter.com/YDxU7lXD0c
— $TSLA Hodler (@TSLAshareholder) October 23, 2024
2. Outlook: Are Growth Targets Achievable? 📊🚗
Volume Commitments
Tesla has made two key pledges to its shareholders: to achieve over 1.8 million vehicle sales in 2023 and deliver a record-breaking 514,000 vehicles in Q4.
- Demand Challenges: With weak demand in Europe and U.S. sales growing only modestly—thanks mainly to the Cybertruck—meeting these targets could prove challenging. Any revision to these growth targets could negatively impact the stock.
- New Models: Investors were hoping for a sneak peek at new models during the robotaxi event, but they left disappointed with little more than the announcement of a facelift for the Model Y. Without clear details on new entries like the anticipated Model 2, Tesla’s outlook may remain rocky.
3. Investor Q&A: Will Musk’s Mood Affect Sentiment? 🎤😬
The Wild Card Factor
The most unpredictable element of the earnings call will be Elon Musk’s demeanor and willingness to engage with investors’ questions.
- Brand Impact: Questions may arise about how Musk’s vocal support for Donald Trump could influence sales among Tesla’s customer base, which skews progressive. Musk’s previous dismissals of such concerns could impact investor sentiment, especially if he doesn’t provide satisfactory answers.
- Recent Success: Although Tesla’s group revenue reached a record $25.5 billion in Q2, buoyed by its Megapack energy storage business, how Musk communicates this success—or any potential challenges—could sway market perception.
Conclusion: Stay Alert! ⚡🔔
With Tesla’s earnings report looming, these three red flags will be critical in determining the stock’s short-term trajectory. Investors should prepare for potential volatility as the market reacts to the numbers, the outlook, and Musk’s remarks. Keep your eyes peeled—this earnings call could be a turning point!