Oct 17, 2023

Tesla (TSLA) will report its third-quarter earnings after the bell this week.


TSLA: Daily Chart

Tesla (TSLA) stock traded at $252 on Monday and has been in a range since September, with $235 and $278 being the targets for bulls and bears.

The company’s margins will be the focus, and analysts expect a drop in the third quarter and fourth quarter, with investors worried that more price cuts will be needed to boost demand. The EV automaker has sacrificed profitability to drive sales of its ageing vehicle line-up, while BYD has still brought competition to China.

“I don’t think the price cuts are over, mainly for the reason that demand is still weak,” said Thomas Martin at Tesla shareholder Globalt Investments.

Investors will be looking for clarity on Elon Musk’s plans to ensure the company will deliver a record 476,000 vehicles in the fourth quarter to meet its annual goal of 1.8 million units. However, in the last earnings call, there were hints the company may miss that. Plant closures for retooling hurt deliveries in Q2.

The price war started by Tesla likely pushed Tesla’s margins to a four-year low of 18.1%, excluding regulatory credits, according to Visible Alpha. That slowdown will continue into the fourth quarter and may dip below 15%, said Wells Fargo’s Colin Langan.

“We are factoring in help from the recent decline in lithium prices. However, that likely falls short of offsetting the price cuts,” Langan said.

Tesla pushed its Cybertruck launch to the end of the year in September, as Musk has said the truck is hard to build. A previous price tag of $40,000 was previously expected for the truck, but demand for EVs should push that higher.

Musk has for a long time seen the potential for Tesla’s full-self-driving technology to boost the company’s value. But it has missed its targets for years in reaching the capability as the technology is under regulatory scrutiny due to safety concerns.

Tesla slashed the technology’s price by a fifth in August, and analysts said that more cuts could be possible. Traders should look at the earnings of TSLA to test its recent price range.

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