Tesla earnings are next week and the whole EV sector could get a jolt
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Analysts are out in force with their digital pencils in advance of Tesla's (NASDAQ:TSLA) earnings report next week.
Expectations are being reeled in with some wildcards in the mix following the round of price cuts in China and the U.S. For starters, Oppenheimer analyst Colin Rusch said investors are looking for a reset on automotive margins to the mid-20s. "We continue to anticipate mixed trading on shares as EV competition begins to play out and expect updated margins to be modestly better than feared with consensus volumes moving slightly lower." he warned.
Citi lowered its price target on Tesla (TSLA) to $137 from $140 off reduced EPS estimates. Analyst Itay Michaeli said the drop in auto prices will be reflected in a lower auto gross margin and forecasts 2023 EPS of $3.73 vs. $4.75 prior. "We make no major long-term estimate changes at this time, which we will revisit post next weekâs results," he wrote. The firm has a Perform rating on Tesla.
Meanwhile, Piper Sandler cut its price target on TSLA to $300 from $340, due mainly to the impact of price cuts Analyst Alexander Potter said that TSLA took longer than expected to cut prices, but now that pricing adjustments have been made, and the valuation has reset, investors should be proactively buying TSLA. Crucially, Potter thinks the electric vehicle maker can easily achieve over 50% delivery growth in 2023.
Evercore ISI also said has it eyes on TSLA's margin rates, noting that there will be a significant impact to the bottom line depending on how long the new price levels last. Analyst Chris McNally said the firm simply calculated around $3.00 to $3.50 EPS for Tesla (TSLA) in 2023 or an additional ~$1.10 to $1.50 EPS cut to its recently lowered $4.60 EPS estimate.
On Seeking Alpha, author Bill Maurer took a deep dive into the impact of the TSLA price cuts.
Shares of Tesla (TSLA) are down 2.07% in premarket trading to $126.11 to cut into what has been a strong start to the year.
What to watch: 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.