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Can Tesla's Q3 Earnings Help Bounce Back From Robotaxi Launch?
$Tesla (TSLA.US)$ is set to report its third-quarter earnings on October 23rd, and after a rocky few weeks, all eyes are on the company. The EV giant recently held a highly anticipated robotaxi event, but the market response was underwhelming.
Investors were left with more questions than answers, and Tesla's stock took a hit, falling around 9% after the event. With its upcoming earnings report, Tesla has a chance to refocus attention on its fundamentals.
Revenue Vs. Profit
For the third quarter, analysts expect Tesla's revenue to hit $25.67 billion, up 9.9% from last year's $23.35 billion. However, the company's profits are under pressure. Analysts predict Tesla will report a net income of $1.68 billion, down from $1.85 billion a year ago. Earnings per share (EPS) are expected to be $0.50, a 4% decline year over year.
Tesla's revenue growth is positive, but the profit drop has raised concerns. The company faces higher costs, competitive pricing pressures, and challenges maintaining strong profit margins in a highly competitive EV market. Investors are watching closely to see how these factors affect Tesla's long-term profitability.
Tesla's track record over the last eight quarters has been mixed. According to TipRanks, the company has only met or beaten earnings per share (EPS) expectations in half of those quarters and missed the mark in the last four.
Besides, when Tesla releases its earnings report, there's only a 25% chance that the stock price will increase. On average, the stock price changes by about 10.37% on these days, with the highest increase being 12.06% and the largest drop reaching 12.33%.
More Cars Delivered, But Margins Are What Matter
Almost 80% of Tesla's revenue comes from selling electric vehicles. In the third quarter, Tesla announced that it delivered 463,000 cars worldwide, a 6.4% increase compared to last year and a 4.3% increase from the previous quarter. This is a turnaround, as deliveries had dropped by about 9% in the first quarter and 5% in the second quarter of this year.
However, even though Q3 did return to year-over-year sales growth, it wasn't enough to please investors. As a result, the company's stock price fell nearly 4% on the day the delivery numbers were announced.
It's important to note that Tesla's gross margins have generally declined over the past twelve quarters. In the second quarter of this year, the gross margin was 18%, about 20 basis points lower than last year. There is also a possibility of a slight decline in gross margins for the third quarter.
Why the disconnect? To stay competitive, Tesla has had to cut prices in key markets, including the U.S. and China. This pricing strategy has led to lower average selling prices, which could further squeeze margins.
Barclays analysts stated that Tesla's profit margins have "bottomed out." They expect the company's third-quarter sales to remain flat compared to last year's period, representing an improvement over the declining sales seen earlier this year. The analysts predict that the automotive gross margin for Q3 will beat expectations, reaching 18.2%.
Robotaxi: Opportunities And Challenges
After the robotaxi event, the company unveiled its vision for a self-driving "Cybercab." However, the event needed clear information about how the fleet would make money or grow, leaving investors disappointed. Investors have also not heard any updates about a more affordable or redesigned Model Y.
"Disappointing lack of detail," Adam Jonas, Morgan Stanley's high-profile auto analyst and a TSLA bull, proclaimed in his investor note following the event. Wells Fargo analysts echoed that sentiment, writing that Tesla's robotaxi event was mostly "razzle-dazzle" with "little substance." Jonas said he had been seeking quantifiable data on Tesla's Full Self-Driving (FSD) system improvements. He also hoped to hear about plans for supervised and unsupervised ride-sharing services.
"Tesla's robotaxi event focused more on long-term vision than on immediate deliverables or new sources of revenue," Bernstein's Sacconaghi also wrote in a note. The company showcased prototypes, including a two-door sedan called the Cybercab, a concept van, and an updated Optimus robot. However, it missed key details investors hoped for - such as the transition from advanced driver-assistance systems to fully autonomous vehicles, the roadmap for regulatory approval, and proof that Tesla is ahead of competitors like Alphabet's Waymo.
Energy Storage Business: Still Growing But Slower
In addition to its EV business, Tesla has been focusing on its energy and storage products. In Q3, Tesla deployed 6.9 gigawatt-hours of storage products, a 73% year-over-year increase but a 27% drop from the previous quarter. While these numbers are still better than last year, the slowdown has raised concerns about the consistency of growth in this segment.
Though growing, Tesla has yet to contribute significantly to overall profits. Investors are keen to see how Tesla plans to expand this part of the business and whether it can eventually rival its EV division in revenue and profit generation.
Source: MarketWatch
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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PrimeD : Yup looks like the gross margins are down because the average price per car is down? Eitherway, investors do not like this
10baggerbamm : will car sales accelerate in China ? no one's talking about this right now but their stimulating their economy. they want to get their people out spending, if they spend they buy more cars and Tesla will be one of the benefits from that
102185397 : Short term - pain: TSLA stock to drop further; long term - rise: end of this year or beginning of 2025
101894806 : Wah
101894806 : Wah
10312907 : -15％
RDK79 : No.
RDK79 : Maybe Elon will start giving away red teslas in GA, Nevada, MI…
Mr Willy from philly : If they focus on what they do best , then what ever come next will work for them
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