Tesla earnings preview: Wildcards include deliveries guidance, margin read-throughs and CEO succession hints
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Tesla (NASDAQ:TSLA) will deliver its earnings report on Wednesday after the market close and hold a crucial conference call with potential headwinds lurking in the electric vehicle sector and broad economy.
The electric vehicle giant has already reported that it delivered 405K vehicles in Q4 (+31% Y/Y), but investors will be laser focused on what the pullouts are from the recent price cuts, buyer reactions to the EV tax credit timing, and the color on automotive gross margin expectations.
There is also the question of deliveries growth guidance for 2023. Tesla (TSLA) has issued a generic multi-year ~50% growth target for volume that may need to be revised in the new climate. "Musk needs to rip the band-aid off and lay a more realistic delivery target for 2023 so the Street will have confidence in this number," said Wedbush Securities analyst Dan Ives on the issue. "We view 35%-40% delivery growth for 2023 as the line in the sand based on whisper numbers with 1.8 million units the general bogey for the year," he added.
Ahead of the report, Oppenheimer noted that expectations on Tesla (TSLA) are shifting quickly following the price drops on some key models. Analyst Colin Rusch thinks the electric vehicle maker is making a proactive move to capture incentives, as well as reset prices on EVs in key markets to help protect the companyâs market position and apply pressure on competition from a cash flow. However, the reality is that auto manufacturing margins are likely to fall in the near term. Oppenheimer believes if TSLA is able to maintain automotive gross margin in the mid-20s through the first half of the year and move incrementally higher during the year, shares are likely to trade higher on earnings leverage potential.
On Seeking Alpha, Bill Cunningham did a dive into some important wildcards to watch with the Tesla (TSLA) earnings report that could impact the share price. Meanwhile, author Victor Dergunov has an article pounding the table on the bull case.
What to watch: The conference call could provide an opportunity for Musk to calm investors over the Twitter distraction. Also watch for an appearance by Tom Zhu, who was recently handed Tesla's (TSLA) U.S. assembly plants and sales operations in North America and Europe as additional responsibilities. There is some speculation that Zhu's promotion makes him a candidate to be the eventual successor to Musk. Tesla's (TSLA) earnings report has frequently led to tandem moves within the electric vehicle sector. Some auto stocks that correlate very tightly with the EV mother ship on earnings day include Rivian Automotive (RIVN), Nikola (NKLA), Lucid Group (LCID), Lordstown Motors (RIDE), Sono Group (SEV), and Canoo (GOEV). Look for some share price jolts depending upon the read-through from Elon Musk and company.