Tesla shares paused their extraordinary July rally Tuesday, which has taken the stock to within touching distance of its highest levels in six months, as investors look to the automaker's second quarter earnings after the closing bell.
Tesla (TSLA) shares have risen more than 26% so far this month, adding nearly $160 billion in market value, following a better-than-expected tally for second quarter deliveries that offset concerns over a global EV demand slump.
The group shifted around 444,000 cars over the three months ended in June, topping Wall Street forecasts despite a near 25% slump in overall China sales and continuing weaker demand in Europe.
Tesla delivered 422,405 units of its Model 3 sedan and Model Y midsize SUV, as well as 21,551 units of its higher-priced Model S sedan and Model X full-size SUV, the report indicated.
Related: Tesla Q2 deliveries surprise sends stock soaring despite China slump
Production fell 14.3% to 410,831 vehicles, thanks in part to tight supply chains and closures at its Gigafactory in Berlin. Model 3/Y production was pegged at 386,576 units with Model S/X and "other model" output at 24,255 units.
The stronger delivery numbers, however, must still be set against a series of price cuts, incentive boosts and broader inventory markdowns that are likely to eat deeply into the group's profit margins.
Profit margins in focus
Analysts, in fact, see Tesla's gross profit margin, excluding the benefit of taxpayer-funded credits, to fall by around 2 percentage points from last year to a five-year low of 16.4%, according to Wall Street forecasts.
"Auto gross margins (ex credits) in the 16.5%-17% range would be the sweet spot and should mark the beginning of an upward climb into the next few quarters as price cuts appear to be mostly done with price increases in some regions/models seen the last few weeks," said Wedbush analyst Dan Ives, who carries an 'outperform' rating with a $300 price target on the stock.
Related: Analyst revisits Tesla stock price target ahead of Q2 earnings
Tesla is expected to post a bottom line of 62 cents per share for the second quarter, a tally that is down around 32% from last year, thanks in part to the group's narrowing profit margins.
Group revenues are also expected to decline from last year's levels, falling around 0.65% to $24.77 billion.
That could add pressure to a stock that is benefiting from hopes that its recent transition away from new production lines, and a focus towards self-driving software, AI technologies and robotaxis.
Investors had expected the unveiling of Musk's long-promised robotaxi in early August, but the event has been delayed until at least October, and possibly beyond, owning to what CEO Elon Musk said was "an important design change" that needed extra time to get right.
Robots or robotaxis?
Perhaps anticipating this reaction, Musk said in a post on his X social media network Monday that Tesla plans to add "humanoid robots" to the group's production line as early as next year.
Tesla will have genuinely useful humanoid robots in low production for Tesla internal use next year and, hopefully, high production for other companies in 2026
— Elon Musk (@elonmusk) July 22, 2024
Another key component of today's earnings release, as well as Musk's call with analysts, will be the group's overall delivery forecasts for the year.
Tesla cautioned earlier this year that overall deliveries in 2024 would be "notably lower" than they were in 2023, and last month dropped a reference to its goal of delivering 20 million vehicles each year by 2030.
At the current pace of production, Tesla would need to deliver around 978,000 vehicles over the second half of the year to match its record 1.81 million record total from 2023.
"With the majority of price cuts now in the rearview mirror in our view and demand stabilization globally for EVs especially in China, we believe Tesla's march towards 2 million units’ annual trajectory should be reached over the coming quarters with clear momentum and easier comps for 2025," said Ives at Wedbush.
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Tesla shares were marked 1.25% lower in early afternoon trading and changing hands at $258.39 each, with the stock nudging into positive territory for the year earlier this month.
Short interest in the stock remains elevated, however, with recent data from S3 Partners suggesting bets against the stock of around $18.8 billion, or 3.7% of the stock's outstanding float.
Related: Veteran fund manager sees world of pain coming for stocks
