Tesla’s Q3 Earnings: What Are Analysts Watching?

Tesla (TSLA) is scheduled to release its third-quarter earnings today after the market close. The stock has been trading with positive momentum before its third-quarter results. Previously, we discussed that the company had nine consecutive days of positive returns from October 7 to October 17. Read Tesla Shows Positive Momentum Pre-Q3: More Upside? to learn more.

Tesla’s stock momentum

We’ll have to see if Tesla maintains its momentum after its third-quarter results. We’ll discuss what investors and analysts will look for in Tesla’s results and earnings call.

So far, the stock has fallen 23% YTD (year-to-date). In contrast, the S&P 500 (SPY) and the Dow Jones Industrial Average Index (DIA) have gained 19.6% and 14.8%, respectively. Ford (F) is expected to release its third-quarter results today after the market close. So far, the stock has gained 18.6% this year. General Motors (GM) has gained 8.6% YTD. The company will release its third-quarter results on October 29.

Tesla’s earnings estimates

Analysts expect Tesla to report an adjusted EPS of -$0.23 in the third quarter compared to an EPS of $2.9 in the third quarter of 2018. The company has only reported profits for four quarters in more than a decade. The automaker will likely report revenues of $6.4 billion for the quarter. The revenues would imply a decline compared to the actual revenues of $6.82 billion reported during the third quarter of 2018. The results could set off investors. The company would report its first revenue decline year-over-year since 2012.

Lower revenues and earnings expected 

Investors should note that lower sales and earnings are expected despite the company achieving back-to-back record deliveries for the second and third quarters. The discrepancy is mainly due to the shift in the company’s product mix. Now, Tesla sells more Model 3s. The vehicle has a lower margin compared to Tesla’s other models including Model S and Model X. During the third quarter, Tesla’s Model 3 accounted for nearly 82% of the total deliveries compared to about 67% of the deliveries in the third quarter of 2018.

Tesla’s road to profitability

Investors want to see how much the shift towards lower-margin models impacts Tesla’s profitability.

Production rate per week

Analysts and investors also want to see Tesla’s production rate per week. Previously, the company stated that it expects to hit a weekly production target of 10,000 by the end of this year. Based on the expectation, the company should be close to achieving the target.

Tesla’s update on Model Y and pickup truck

Previously, we discussed that Model Y could be one of the key catalysts for Tesla to achieve its profitability goal. Read Could the Model Y Change Tesla’s Profit Game? to learn more. Therefore, analysts will be watching Elon Musk’s comments on Model Y’s progress. In addition to Model Y, analysts will pay attention to Musk’s comments on the electric pickup truck update. Tesla will likely unveil the truck in November. Read Tesla’s Electric Pickup Truck Demand: Is Musk Skeptical? to learn more.

Fourth-quarter guidance and China Gigafactory

The markets will also be interested in Tesla’s fourth-quarter guidance. The ramp-up expectations from China’s Gigafactory could impact the guidance. Tesla achieved a major milestone. The company received a green signal from China’s government to start producing EVs in the country. We’ll have to see if Musk still expects production of 3,000 Model 3 vehicles per week by the end of this year.

Stay with us for detailed coverage of Tesla’s results and earnings call.