Electric vehicle (EV) giant Tesla Inc. (TSLA) is set to release its highly anticipated third-quarter 2024 financial results on Wednesday. While the company delivered a respectable 462,890 vehicles in Q3, representing a 6.4% year-over-year increase, concerns remain regarding declining auto gross margins and the overall health of EV demand. Analyst predictions are mixed, ranging from cautious pessimism regarding margin compression to optimistic outlooks focusing on future product strategies and potential fourth-quarter recovery. The upcoming earnings call promises to offer crucial insights into Tesla’s present performance and its long-term trajectory, impacting both investor confidence and the broader EV market.
Key Takeaways: Tesla’s Q3 Earnings on the Horizon
- Mixed Analyst Predictions: While Tesla delivered 462,890 vehicles in Q3, exceeding some predictions, analysts disagree on whether the company will meet non-GAAP EPS and gross margin expectations. Some experts predict margin compression, others a more positive outcome.
- Focus on Auto Gross Margin: The key metric for investors will be auto gross margin excluding regulatory credits. Analyst estimates vary significantly, signaling uncertainty about Tesla’s pricing strategy and cost management.
- Elon Musk’s Q&A: All eyes will be on CEO Elon Musk’s commentary during the earnings call to gauge his outlook on future EV demand, the timelines for autonomous driving technology (FSD), and the launch of the Cybercab.
- Potential Delivery Slowdown: Tesla faces the risk of its first-ever annual decline in deliveries, fueled by year-on-year decreases in Q1 and Q2 2024.
- Pre-Earnings Stock Dip: Tesla’s stock experienced a slight dip in premarket trading, highlighting investor cautiousness ahead of the earnings announcement.
Analyzing the Analyst Forecasts: A Divergence of Opinions
The anticipation surrounding Tesla’s Q3 earnings is heightened by the diverse opinions among analysts. Troy Teslike, for instance, predicts that Tesla will miss analyst consensus estimates for both non-GAAP EPS and gross margins. He expects a non-GAAP EPS of $0.55, considerably lower than the consensus of $0.60. He also forecasts significant pressure on automotive gross margins, even excluding regulatory credits. This bears contrast with the more optimistic outlook of Gary Black, who expects a slightly lower but still healthy auto gross margin (excluding regulatory credits) of 14.2%, compared to the consensus of 14.9%, and a non-GAAP EPS of $0.56. Black’s analysis emphasizes the “downward trajectory” in Tesla’s auto gross margin, highlighting the ongoing challenges.
Gary Black’s Analysis and Concerns
Black’s more optimistic prediction stems from incorporating certain assumptions like the global rollout of Tesla’s 0.99% promotional loan rate and estimated losses associated with the company’s China deliveries. He expressed concern about this downward trend on social media platform X, pointing directly to the pressure on margins. His assessment underlines the importance of understanding the nuances of Tesla’s pricing strategies and their impact on profitability across different markets.
Daniel Ives’ Optimistic Outlook and Emphasis on Future Strategies
In contrast to the more cautious predictions, Daniel Ives, a Wedbush analyst and Tesla bull, holds a more optimistic stance. He anticipates that Elon Musk will use the earnings call to address concerns about the overall demand environment for EVs, particularly highlighting expectations for the fourth quarter of 2024 and the full year of 2025. Ives specifically hopes that the call will provide more detail on Tesla’s long-term plans for Full Self-Driving (FSD) and the Cybercab, addressing some dissatisfaction amongst investors following the Robotaxi Day event. He believes that this forward-looking perspective will be critical in shaping investor sentiment.
Tesla’s Q3 Performance: Deliveries and Energy Storage
Tesla’s Q3 vehicle deliveries totaled 462,890 units, a modest 6.4% year-over-year increase. While positive, this growth is not as substantial as many hoped for, placing further scrutiny on the company’s ability to stimulate demand in the face of intensifying competition. The relatively stagnant growth further contributes to concerns about a potential first-ever year-over-year decline in deliveries, adding to the pressure on the company’s overall performance metrics. Additionally, the company deployed 6.9 GWh of energy storage products, notably lower than the 9.4 GWh deployed in Q2 2024. This decrease in energy storage deployments adds another layer of complexity to the analysis of Tesla’s overall financial performance for Q3.
The Risk of Declining Annual Deliveries
The concerning trend of declining year-over-year deliveries cannot be ignored. The 8.5% drop in Q1 2024 and the 4.8% drop in Q2 2024 directly contribute to this potential first-ever decline in annual deliveries. This makes the Q3 results even more critical for understanding whether the company can reverse this worrying pattern and demonstrate growth moving forward. The upcoming earnings and the management’s strategy to address this issue will be major factors in influencing future investor confidence.
Tesla Stock Performance and Market Sentiment
Before the earnings release, Tesla’s stock experienced a slight downturn, falling 0.7% in premarket trading on Tuesday. This precedes its Monday closing price of $218.85. The year-to-date performance shows a 11.90% decline, signaling a cautious market sentiment. This pre-earnings decline underscores the tension and uncertainty surrounding the upcoming earnings announcement and the potential impact on Tesla’s stock price. The market is clearly weighing the various conflicting analyst predictions and assessing the potential implications of potentially underwhelming results.
Conclusion: A Pivotal Moment for Tesla
Tesla’s Q3 2024 earnings report represents a critical juncture for the company. While the delivery numbers show some continued growth, the concerns about declining margins and the potential for a first-ever annual decline in deliveries add significant weight to this report. The various analyst predictions highlight the diversity of opinions and uncertainty surrounding Tesla’s future. Elon Musk’s commentary during the earnings call will be pivotal, not only for immediate investor reaction but also in shaping the company’s long-term narrative. Ultimately, the report will provide insight into Tesla’s ability to navigate an increasingly saturated EV market and maintain its position as a market leader.
