The electric vehicle sector will be on high alert when Tesla (NASDAQ:TSLA) reports earnings on October 18 after the market closes. Analysts expect the Austin-based company to disclose revenue of $24.3B for the quarter and EPS of $0.75. Automotive gross margin is expected to fall to 17.5% from 18.1% in Q2 and 19.0% in Q1. Tesla (TSLA) already reported that it produced 430,488 vehicles and delivered 435,059 vehicles during Q3. The electric vehicle maker said a sequential decline in volumes was caused by planned downtimes for factory upgrades. Crucially, Tesla’s (TSLA) 2023 volume target of around 1.8 million vehicles has remained unchanged so far, but it is unclear if demand consideration ands recent price cuts on the Model 3/Model Y will be factors in the new update.
Ahead of the report, Morgan Stanley noted that expectations seemed quite low for the quarter, with investors bracing for some negative revisions. Analyst Adam Jonas thinks commentary around 2024 volume and Cybertruck execution could be key. Wells Fargo thinks the main event in the earnings report will be the reaction to margin erosion. Analyst Colin Langan noted that Tesla (TSLA) walked away from its 20% auto gross margin target earlier in the year after additional price cuts. He expects Tesla (TSLA) to disappoint with a margin ex-EV credits of 16.3% in Q3 and sub-15% margin rate in Q4.
On the earnings conference call, investors will be focused on the deliveries and margin guidance. There is also the potential for news on the Mexico plant after a senior Mexican government official said last week that the facility’s final permits could be ready shortly. The date for a Cybertruck launch event could also be disclosed. An interesting wildcard will be what Elon Musk has to say in regard to the United Auto Workers strike and any anticipated benefit for Tesla (TSLA). Options trading on Tesla implies a 7% swing up or down for shares after the report drops. Tesla shed just under 10% after its last earnings report. Fisker (FSR) and Rivian Automotive (RIVN) are the two electric vehicle stocks that correlate the closest to Tesla.