Heading into Tesla second-quarter earnings this week, the EV giant's much anticipated Cybertruck dominated the news cycle after the Saturday's report of the first vehicle produced at the company's Austin plant. Meanwhile, analysts continue to ring warning bells on margins.
Over the weekend, just four days before earnings, Tesla tweeted a photo of the first Tesla Cybertruck made at its factory. Chief Executive Elon Musk commented "congrats to the Tesla Team." Tesla stock responded Monday, jumping 3.2% to 290.38 during market trade.
Cathie Wood's ARK Investment Management sold 45,184 shares of Tesla Monday for around $13.12 million, based on TSLA closing price, according to the company's daily trade disclosure.
With attention turned to the Cybertruck, important unknowns and questions remain ahead of Q2 earnings. How well have margins held up after the companies aggressive price cuts? And, heading into Q3, the risk of overproduction is an issue. In addition, Saturday's announcement raises pressure among investors wanting a timeline on when mass production and deliveries will start for the long-delayed Cybertruck.
Tesla originally said the Cybertruck would start at $39,900, with a $69,900 tri-motor version with a range above 500 miles. But it removed those listings from its website years ago.
Musk has already teased a Q3 Cybertruck event. Late last week, Tesla launched the Cyberquad, a Cybertruck-inspired ATV for kids, in China. The electric-ATV will go on sale in China on July 14 for around $1,670.
Morgan Stanley analyst Adam Jonas wrote Tuesday "now that the first Cybertruck has rolled off the line in Texas, the fun can start."
"Investors will have an ear out for any potential info on the new release during the earnings call Wednesday," the analyst said.
Tesla Stock
On Tuesday, Tesla stock gained 1% to 293.34, with volume below average, in market trade.
TSLA rose 2.5% last week to 281.38, hitting a fresh 2023 high intraday Friday. TSLA stock is up 128% in 2023. Shares are working on a 313.80 buy point from a deep consolidation going back to late September, according to MarketSmith analysis.
The Wall Street Journal reported Monday that Tesla is planning to double the size of its Berlin manufacturing factory to produce up to one million vehicles per year.
Tesla applied for approval to expand the plant to increase production capacity for vehicles and batteries, according to the Wall Street Journal.
Tesla stock ranks third in IBD's automaker industry group. It has a 98 Composite Rating out of 99. Tesla has a 96 Relative Strength Rating and its EPS Rating is 93 out of 99.
Analysts Cautious Going Into Earnings
On Monday, Wells Fargo analyst Colin Langan raised the firm's price target on Tesla stock to 265, up from 170, while maintaining an equal-weight rating.
Langan wrote Monday that while Tesla beat Q2 delivery volume estimates, Wells Fargo is cautious about how price cuts may have affected Tesla's Q2 auto margins. Langan is also concerned about production volumes outpacing demand heading into the second half of 2023.
While Tesla beat Q2 delivery volume estimates, Wells Fargo forecasts the company's gross margin on autos falls to 17.5% due to continued price cuts and weaker mix, Langan wrote Monday.
"Margins, margins, margins," Wedbush analyst Daniel Ives, a longtime Tesla bull, wrote Monday.
Ives said Tesla should be able to top Wall Street Q2 estimates but the big focus is on auto gross margins "to gauge the impact of the price cuts and what this means for margins going forward."
The Wedbush analyst wrote he also expects auto gross margins to be around 17.5%. However, Ives added gross margins "should ramp back over the coming quarters and back toward the 20% level heading into 2024."
This follows Citigroup raising its Tesla stock price target to 278 from 215 last week. Analyst Itay Michaeli maintained a neutral rating on TSLA. He sees a "neutral-to-slightly negative" setup for Tesla going into the Q2 report. Michaeli remains concerned about price cuts eating into margins.
On Tuesday, Jonas joined the chorus of analysts saying margins are top of mind. The Morgan Stanley analyst said he has seen estimates as low as 16% to as high as 20% for Tesla's Q2 gross margins.
"We are relatively cautious on the earnings revision outlook while prepared for the company to tout its AI chops," Jonas said.
Margins Fell In Q1
On April 19, Tesla reported a big first-quarter earnings decline while revenue missed views. Profit margins for the global EV giant fell below 20% as the company executed an aggressive price-slashing strategy in the first part of 2023.
The EV company's total gross profit came in at $4.5 billion. Tesla's gross profit margin at 19.3%, down from 23.8% in the fourth quarter and 29.1% a year earlier.
In the fourth quarter, gross margins on autos, excluding regulatory credits and leases, skidded to 18.3% from 23.8%. That remains below the 20% gross margin "floor" Tesla previously targeted.
Tesla Stock: What To Expect From Q2
The EV company reports second-quarter financials late on Wednesday. Analysts expect profits to edge up around 4% to 80 cents per share. Wall Street expects revenue totaling $24.22 billion, up 43% compared to last year.
Investors will listen for news about an upcoming, updated Model 3. Investors also will look for news on a future Mexico plant, which will make Tesla's next-generation model. Musk has hinted at the next-gen model, but no more than that.
TSLA reported record global deliveries in early July — as price cuts, tax credits and discounts propelled demand well above Wall Street forecasts.
Tesla deliveries ran to 466,140 in the second quarter, sprinting past Q1's record 422,875 and Q4's 405,278. Model 3 and Y deliveries hit 446,915 in Q2. Model S and X deliveries picked up to 19,225. Production hit 479,700, exceeding deliveries once again, even with Tesla curbing output below capacity.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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