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Tesla Q3 earnings preview: Margins, delivery guidance, Cybertruck status in focus

Tesla Q3 earnings preview: Margins, delivery guidance, Cybertruck status in focus


Tesla (TSLA) shares have underperformed the market over the past three months. Investors will be hoping the electric-vehicle maker’s Q3 earnings, coming after the bell on Wednesday, could rectify that situation.

Continued price cuts for its popular Model 3 and Model Y vehicles across the globe, a slower than planned rollout of its highly anticipated Cybertruck, and the departure of long-time CFO and Elon Musk “whisperer” Zachary Kirkhorn have weighed on the stock. Tesla shares are down 9.5% over the past three months, whereas the broader S&P 500 (^GSPC) has lost only 3.1%.

For the quarter, Wall Street is expecting Tesla to report top line revenue of $24.16 billion, which would represent a 13.6% jump from a year ago. From a profitability standpoint, the Street is expecting adjusted earnings per share (EPS) of $0.74, translating to adjusted net income of $2.56 billion, which is nearly 30% lower than a year ago.

The drop in profitability could be attributed to expected downward pressure on margins since Tesla began its cost-cutting efforts late last year. Last quarter, Tesla reported gross margin of 18.2%, missing Street estimates, with operating margin dipping to 9.6%.

Investors will be hoping a “margin trough” occurred in the third quarter. “With the vast majority of price cuts now in the rear view mirror and the factory shutdowns/upgrades completed we believe gross margins should expand from these levels with 3Q marking a trough period,” Wedbush analyst Dan Ives said in a note.

Earlier this month, Tesla said it delivered 435,059 vehicles globally, of which approximately 419,000 were Model Y and Model 3 vehicles and around 16,000 were higher-priced Model X and Model S cars. Wall Street consensus estimates had deliveries pegged at 456,722.

“A sequential decline in volumes was caused by planned downtimes for factory upgrades, as discussed on the most recent earnings call. Our 2023 volume target of around 1.8 million vehicles remains unchanged,” Tesla said in a statement.

Through three quarters of the year Tesla has delivered around 1.3 million vehicles globally, so the company will need a very strong quarter — of around 500,000 — to hit its annual delivery goal.

Also in focus is the upcoming launch of the Cybertruck. Though Tesla had said a delivery event would occur in Q3, no event took place in the quarter. The company also said it would begin production of the Cybertruck later this year; an updated timeline for Cybertruck production is expected for the highly anticipated EV pickup.

Longtime Tesla bull Adam Jonas of Morgan Stanley heard a different story following a lunch event with Tesla investors – with many of them surprisingly nonplussed by its prospects, but still hopeful for good news.

“Cybertruck – very little enthusiasm on Tesla’s next model. Teething issues seen as perpetuating Tesla’s relatively stale model lineup,” Jonas wrote in a note, though adding, “If Tesla announced a launch event/start of production with 3Q results, this could be seen as positive for the stock.”

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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