Key topics to watch for with Tesla’s earnings report

Tesla (NASDAQ:TSLA) will deliver its Q3 earnings on Wednesday after the closing bell, with all eyes focused on the electric vehicle maker’s comments around the consumer electric vehicle demand environment heading into Q4 and 2025. Investors look past the talk from Elon Musk and gang about autonomous driving, FSD upside, and humanoid robots to focus on the demand story and potential for margins to improve if pricing stabilizes.

Analysts expect the EV maker to post revenue of $25.7 billion and EPS of $0.60. The operating margin line will be closely watched after Tesla (TSLA) saw a sequential improvement in Q2 to 6.3%, although last year’s mark of 7.7% could be unreachable. In terms of deliveries guidance, Wedbush Securities thinks the 1.8 million unit bogey for 2024 remains achievable, with +2 million deliveries the focus for 2025. “Margins will be a key focus on the conference call as the Street want to see a leveling off for Auto GM (ex credits) and track back heading towards the ~20% threshold level for 2025. We need to start seeing this key metric head into the high teens for 3Q/4Q to give the Street comfort much of the price cuts are in the rearview mirror showing better margin days are ahead for 2025,” highlighted analyst Dan Ives. On the positive side, China continues to heat up the demand story for Tesla (TSLA) with favorable leasing/financing terms and pent-up demand in the region boosting sales.

Due to a lack of details at the Robotaxi event, Hargreaves Lansdowne analyst Matt Britzman thinks investors will be eager to hear commentary on both the more affordable model and a refreshed Model Y. He also expects positive commentary on the China demand story for Tesla (TSLA), while Europe was noted to continue to be a slight overhang with EU subsidies and macro pressures. Operating-profit margins in the third quarter of 2023 came in at about 7.6%.

Tesla (TSLA) will hold its earnings conference call at 5:00 p.m. on Wednesday. A point of major emphasis will be Elon Musk’s commentary on the timing of a new mass-market cheaper electric vehicle, as well as the latest updates on FSD, energy storage business, and robotaxi developments. Wildcards include an announcement about a new partnership or a potential capital raise due to the company’s significant capital needs. Options trading on Tesla (TSLA) implies a 7% swing in share price after the earnings reports. Of note, Tesla (TSLA) shed 12.3% the session after its Q2 earnings report. EV stocks with the tightest trading correlation to Tesla (TSLA) after earnings include Rivian Automotive (RIVN), Faraday Future Intelligent (FFIE), and NIO (NIO). Meanwhile, Uber (UBER) has had a negative trading correlation to Tesla (TSLA) on days with robotaxi developments.