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Tesla Earnings Preview: Here’s What to Watch For

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Tesla (NASDAQ: TSLA) is scheduled to report second-quarter 2021 earnings on July 26 after the market closes. In the past year, shares of the electric vehicle behemoth have skyrocketed more than 110% and are currently trading at over $660. A strong set of numbers could send shares on an upward trajectory, so let’s take a closer look at what analysts on the Street are expecting.

Tesla Earnings Preview

Tesla is expected to report adjusted EPS of $0.96 on revenues of $11.22 billion. Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $0.91 per share.

Prior Period Results

In the previous quarter, the company reported triple-digit growth with adjusted earnings of $0.93, compared to the prior year quarter. That said, the result topped the consensus estimate of $0.75. In addition, revenue rose 74% to $10.4 billion, but marginally missed analysts’ expectations of $10.48 billion. (See Tesla stock chart on TipRanks)

Factors To Watch Out For at Tesla

The electric vehicle market pioneer with the striking product design posted its seventh profitable quarter for the January-March period. Despite seasonality, unstable supply chain, and the company’s transition to the new Model S and Model X, Tesla recorded its highest ever vehicle production and deliveries.

The trend is expected to continue in the to-be-reported quarter, as elevated demand for vehicles was perceived in the second quarter as well. This was due to the rising popularity of green vehicles, changing customer preferences post the pandemic outbreak, fiscal stimulus, and vaccination-driven gradual economic recovery.

Notably, Tesla delivered 201,250 units in the second quarter, which rose from the 90,650 deliveries in the same quarter last year and the 184,800 vehicles delivered in the prior quarter.

That notwithstanding, cost-management leading to a reduction in average cost of the vehicles remains the priority for Tesla, the positive impact of which can be expected in the results. Notably, while the average selling price of vehicles decreased in Q1, the company posted a higher auto gross margin on the decline in costs.

During the last earnings call, management commented, “About three and a half years into its production, and even without a European factory, Model 3 was the best-selling premium sedan in the world, outselling long-time industry leaders such as the 3 Series and E-Class. This demonstrates that an electric vehicle can be a category leader and outsell its gas-powered counterparts. We believe Model Y can become not just a category leader, but also the best-selling vehicle of any kind globally.”

Vehicle sales for the automaker ramped up in the to-be-reported quarter, as escalating demand for Model 3 and Y was visible. Markedly, in the second quarter, the Model 3/Y unit vehicle deliveries of 199,360 more than doubled on a year-over-year basis, while increased 9% sequentially.

Over the coming years, management expects to achieve 50% average annual growth in vehicle deliveries.

In the Q1 press release, Tesla said, “We are currently building Model Y capacity at Gigafactory Berlin and Gigafactory Texas and remain on track to start production and deliveries from each location in 2021. Gigafactory Shanghai will continue to expand further over time. Tesla Semi deliveries will also begin in 2021.”

Additionally, Tesla’s Solar Roof and Powerwall products are likely to have aided growth for solar and energy storage deployments in the second quarter.

Analyst Recommendations

On July 16, Bank of America Securities analyst John Murphy maintained a Hold rating but increased the stock’s price target to $750 (13.6% upside potential) from $700.

Murphy anticipates “beats across the board versus low expectations and outlooks” for the automotive industry in Q2.

In a note to investors, the analyst said that the impact on sales due to the current semiconductor shortage is generating additional pent-up demand “to be more rationally released over a multi-year recovery.”

Recently, Goldman Sachs analyst Mark Delaney reiterated a Buy rating and a price target of $860 (30.2% upside potential) on the stock.

Delaney increased its earnings expectations to $0.94 per share from $0.84, prior to Tesla’s second-quarter earnings report, considering updates to the Model Y to drive earnings higher.

Nevertheless, the analyst believes that his price target is exposed to risks based on chip shortages, elevated freight expenses, and a rise in input prices.

Overall, the stock has a Hold consensus rating based on 10 Buys, 6 Holds, and 7 Sells. The average Tesla price target of $642 implies 2.8% downside potential from current levels.

According to the new TipRanks’ Risk Factors tool for the company, the Tesla stock is at risk mainly from two factors: Finance and Corporate, and Production risk, which contribute 31% and 29%, respectively, to the total risk for the stock. Within the Finance and Corporate risk category, TSLA has 13 risks, details of which can be found on the TipRanks website.