June 17, 2024

Here’s What Wall Street Is Looking For in Tesla’s 2nd Quarter Earnings

  • Tesla plans to report second-quarter earnings on Wednesday after the market closes.
  • Wall Street is laser-focused on the company’s profit margins after the company slashed prices for its vehicles.
  • Here’s what Wall Street expects from the EV maker’s earnings report.

Tesla is scheduled to report its second-quarter earnings results on Wednesday after the market closes, and Wall Street analysts are laser-focused on the company’s gross margin levels.

“Margins, margins, margins,” Wedbush analyst Dan Ives wrote in a note Monday.

Aside from its fleet of electric vehicles, Tesla set itself apart from the rest of the auto industry by having very high margins, peaking at nearly 30% in the first quarter of 2022. That was more than double the profitability levels of automobiles other, including. Ford and General Motors.

But since then, Tesla’s margins have fallen to just under 20% after the company series of price reductions in effect to help increase demand for its vehicles.

And the price cuts worked. Tesla delivered a record 466,000 vehicles in the second quarter, well ahead of Wall Street estimates of 447,000. The strong deliveries should translate into solid revenue for Tesla.

“As we’ve discussed, the aggressive price cuts were a near-term pain for long-term gain strategic move for Tesla to put an iron fence around its installed base and acquire new EV customers by cutting prices against a backdrop of choppy macro strategy. it was a home run,” Ives said.

The consensus on Wall Street is that Tesla will generate $24.5 billion in revenue for the quarter, along with earnings per share of $0.82, according to data from Yahoo Finance. The real question for Tesla investors is how much of the company’s profit margin has to be sacrificed to sell so many vehicles through price cuts.

Ives expects Tesla’s gross margin to fall to 17.5% in the second quarter, down from 19.3% in the previous quarter and the lowest level since 2019. But after that, he expects margins to back to 20% under heading in 2024 as. demand for its vehicles should remain strong.

Ives mentioned that the Model 3 and Y could be renewed, together to roll out the Cybertruck as a catalyst for Tesla to maintain solid demand. He has an “Outperform” rating on Tesla and a $300 price target, indicating a potential upside of about 4% from current levels.

JPMorgan is less bullish on Tesla stock, although it acknowledged the strong second quarter deliveries. But according to JPMorgan analyst Ryan Brinkman, much of the gains for Tesla have already been priced into the stock even though Wall Street estimates have deteriorated.

“The last time Tesla shares closed as high as they did on June 30, the Bloomberg consensus was for 2Q23 revenue of $29.0 billion (vs $24.3 billion today), EPS of $1.42 (vs $0.80 today) and deliveries of ~467,000 ( consistent with what has just been reported),” Brinkman said in a note earlier this month.

Ultimately, Tesla’s price cuts have clear implications for the company’s long-term earning power, and thus its stock price. According to JPMorgan, Tesla’s stock price is too high, with the bank assigning an “Underweight” rating and a $120 price target, indicating a potential downside of 58% from current levels.

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