Tesla (TSLA), a Zacks Rank #3 (Hold) stock, is scheduled to report third-quarter earnings after the market closes on Wednesday, October 18th. Tesla shares have outperformed the auto industry and the broader market this year, rising 133%.
However, as earnings approach, Tesla’s earnings could be impacted by various factors, including sharp price cuts, production cuts and new product launches such as the Cybertruck and Semi.
For the current quarter, the Zacks Consensus Estimate calls for Tesla’s third-quarter earnings to decline 30.48% to $0.73. If Tesla meets analyst expectations of $0.73, its earnings will be lower than earnings of $0.91 per share last quarter and earnings in last year’s third quarter of $0.76 per share.
Option implied movement, often referred to as “implied movement,” is a stock market concept related to option pricing. It represents the market’s expectation of how much a stock’s price might move following an upcoming event (in this case, Tesla’s third-quarter earnings per share). Traders can use this information to make informed decisions about their trades and manage risk to anticipate major market moves following earnings reports or other key events. The Tesla options market currently suggests a move of +/- 7.1%. Over the past three quarters, Tesla’s stock price has risen approximately 10% (-9.74%, -9.75%, +10.97%) the day after its earnings report.
Tesla has cut prices across several areas this quarter, including domestic vehicles, Chinese vehicles and leasing. It is assumed that Elon Musk reduced the price for the following three reasons:
1. Stimulate demand. With stubborn inflation affecting consumers, lower prices can help stimulate demand.
2. Government incentives. To qualify for generous government incentives for electric vehicles, the vehicle must be priced below a certain price.
3. Squeeze the Big Three – Ford (F), Stellantis (STLA) and General Motors (GM) are locked in a nasty labor dispute with the United Auto Workers (UAW). While Tesla is already the dominant player in the EV market (50% of the market), lower prices could make the battle for EV supremacy even more lopsided.
Tesla already has some of the highest profit margins in the industry. Tesla’s gross margin is 21.49%, while the auto industry’s gross margin is 17.58%.
The question is, are investors willing to sacrifice profits in exchange for greater market share? Does Musk want to do what Bezos once did? (Prices were reduced to such an extent that it was almost impossible to compete). As discussed in my recent review, Tesla prices now rival those of regular new cars.
Tesla founder and CEO Elon Musk said autonomous driving is the most important problem Tesla must solve to achieve long-term success. Successful implementation of self-driving means increased sales, fewer traffic accidents, and the potential of “robotaxi” (more revenue for Tesla and Tesla customers). Investors should take Musk at his word and pay close attention to the company’s claims of progress toward “fully autonomous driving.” In his July speech, Musk mentioned that the electric vehicle maker was in talks to license its fully autonomous driving technology.
Most analysts who follow Tesla expect the company to begin delivering its long-awaited Cybertruck SUV sometime in the fourth quarter. However, since Elon Musk’s timeline is so ambitious, investors should pay close attention to any comments about the Cybertruck.
Tesla beat the Zacks Consensus EPS Estimate for the tenth straight quarter. Could Tesla pull off another positive surprise given lower-than-usual expectations?
Since Tesla is not unionized, the king of electric vehicles will undoubtedly benefit from the ongoing labor dispute. However, the extent of this positive catalyst remains unclear.
Tesla will report third-quarter earnings under challenging circumstances. Profits may be affected by factors such as price cuts, production cuts and new product launches.
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Post time: Oct-18-2023