Tesla Earnings To Shed Light On Growth Outlook With TSLA Stock Near Lows

Tesla (TSLA) earnings late Wednesday, come as TSLA stock has been weighed down by concerns over demand in China, the global economy and CEO Elon Musk’s financing needs for his Twitter (TWTR) deal.

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Analysts expect Tesla earnings to rise 62% to $1 a share. Revenue is seen rising 62% to $22.3 billion.

Price increases were likely a key to the quarter’s results. Analysts expect an average vehicle price around $57,000, up from $49,000 in the year-ago quarter.

Q3 deliveries, announced on Oct. 2, hit a record 343,830, but fell shy of estimates. However, production of nearly 366,000 vehicles was largely in line. The difference reflected vehicles in transit at the end of the quarter, the company said.

Tesla Production Outlook

Tesla has been targeting a 50% annual increase in deliveries to 1.4 million this year. A key question is whether the company will walk back that target or pull out all the stops to reach it. On Oct. 10, Morgan Stanley analyst Adam Jonas trimmed his estimate to 1.31 million units from 1.37 million. He also cut his 2023 delivery forecast to 1.8 million from 2 million.

Tesla ramped up its output in Shanghai to more than 20,000 vehicles per week, up from 17,000. At the same time, waiting lists for Tesla vehicles in China have been getting shorter, so growth may have to rely on exports. Tesla rival BYD, meanwhile, has seen booming EV sales, topping 200,000 in September alone. That includes hybrids.

BYD (BYDDF), Nio (NIO) and other China EV makers are increasingly competing vs. Tesla vehicles directly with brand-new EVs.

European backlogs also have been coming down. So a big jump in Shanghai exports to Europe may be short-lived, especially with the Berlin plant slowly ramping up output.

Economic concerns are likely to continue to hang over Tesla, with a global recession expected in 2023. It’s unclear the extent to which EV demand can withstand recession.

EV Incentives

Since the Q2 report, passage of the Inflation Reduction Act has improved the intermediate-term financial outlook for Tesla. The law provides $7,500 tax credits for EVs that qualify based on where the vehicles and battery materials are produced. The credit phases out above $300,000 in income for couples.

Incentives for U.S.-based production could amount to $3,100 per vehicle, or $2.8 billion for Tesla, based on its potential 900,000 U.S. production capacity, Wells Fargo analyst Colin Langan wrote in an Oct. 14 note. Langan increased his earnings estimates for Tesla by 33% through 2026 to reflect Inflation Reduction Act incentives.

There remains some uncertainty over which vehicles will qualify for the new U.S. credits.

Incentives for new commercial EVs include tax credits of up to $40,000. Tesla plans to deliver its first Tesla Semi later this year, but has yet to reveal production targets for 2023. Investors will be eager to learn more about plans for both the Tesla Semi and Cybertruck.

Musk has said the Cybertruck will be produced by mid-2023, but the upcoming model has been delayed several times.

TSLA Stock

Tesla stock edged higher Wednesday afternoon. Shares rose 0.4% to 220.19 on Tuesday after jumping 7% on Monday. Last Friday, TSLA stock tumbled to a 15-month low, falling as low as 204.16. Tesla stock is now 47% off its all-time high hit early last November.

Macroeconomic concerns are likely the biggest factor hanging over Tesla, but financing for Musk’s Twitter (TWTR) purchase also has created some uncertainty. One analysis figured that Musk may need to unload an additional $8 billion in TSLA stock.

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