Results from Tesla Inc (NASDAQ:TSLA) for the third quarter after Wednesday's market close arrive with the stock down almost 50% from its high last November, with investors and analysts cutting their earnings expectations for the electric vehicle maker for this year and next.
Commentary from Elon Musk and co may outline headwinds to profit margin from prices of energy and raw materials, plus maybe some surprise extra details, such as the recent tweet that production of the semi-truck has begun ahead of first pre-Christmas deliveries.
While second-quarter profits surprised to the upside, this was despite revenues slipping lower than the previous two quarters, with a 13% uptick in operating expenses from higher raw material, commodity and logistics costs offset by vehicle prices being raised to “frankly ... embarrassing levels", boss Elon Musk admitted.
Still, for the full year, Musk remains on track to reach his 1.3mln deliveries target for the year, though he is aiming for the year to finish with the company delivering a pro-rata 2mln EVs a year.
At the start of this month, Tesla revealed it ticked off a big increase in sales for the third quarter, with EV deliveries up 42% year-on-year increase to 343,830 for the three months to end-September, though this was slightly short of Wall Street expectations, which the company largely blamed on vehicles being in transit.
While the reasoning from Tesla makes sense on paper, said analysts at New York broker Wedbush, "the Street will not be convinced and lingering worries about demand issues will persist until we hear around year-end unit guidance on Tesla's conference call October 19".
Earnings for the quarter are expected to come in at US$1.04 a share.
For the full year, analysts at Berenberg cut their full-year automotive profit (EBIT) forecasts by 4% for 2022 to US$13.8bn and 15% for 2023 to US$22.2bn.
"Tesla’s logistics challenges, particularly with growing numbers of vehicles in transit, mirror commentary from other global OEMs," they said, adding that claims of the rollout of its Full Self-Driving (FSD) software by year-end are likely to be softened too.
Operating margins are likely to be closely watched, said CMC Markets analyst Michael Hewson, analyst given recent problems, and following the fall from 32.9% in Q1 to 27.9% in Q2.
Sophie Lund-Yates at Hargreaves Lansdown said signs of a growth slowdown in China will also be watched for, with the region home to worthy competition, with Tesla’s September sales less than half the vehicles sold by rival BYD.
With prices having been hiked to offset the effect of inflation in the supply and production chains, "there’s a limit to how far these selling prices can go before customers start to delay their Tesla purchase", said Lund-Yates.
"Tesla has a formidable fan-base, but they’re catering to a demographic that’s about to feel the burden of the worsening cost-of-living crisis. We worry not everyone will be able, or willing, to keep paying the price tag Teslas demand in the current climate."