Nasdaq 100 analysis: Where next for Tesla stock ahead of Q2 earnings?

Key takeaways

• Tesla delivered a record number of vehicles in the second quarter
• Price cuts, rebates and other incentives underpin growth in demand
• But this is hurting Tesla’s profitability, with margins forecast to hit multi-year lows
• Wall Street is optimistic about the second half and expect deliveries to keep growing and for margins to start recovering
• Markets starting to pay more attention to other parts of Tesla’s business, from charging network to solar business.
• Tesla shares are risen 2.5-fold this year, but there are signs momentum is waning

Tesla Q2 earnings date and time

Tesla will release second quarter earnings after US markets close on Wednesday July 19. A live Q&A session will be held with management via a webcast that starts at 1630 CT (1730 ET).

Tesla Q2 earnings consensus

Tesla is forecast to report a 43% year-on-year jump in second-quarter revenue of $24.3 billion and a 6.6% rise in adjusted EPS of $0.81.

Tesla Q2 earnings preview

Tesla has already revealed that it delivered over 466,000 vehicles in the second quarter, marking a new quarterly record! That blew estimates out of the water considering Wall Street had anticipated less than 426,000 deliveries.

(Source: Company reports, with estimates from Bloomberg)

Tesla sold just under 890,000 cars in the first half of 2023. It is expected to report new record deliveries in the third and fourth quarters and markets are confident it can achieve its goal of selling 1.8 million vehicles over the course of 2023. If achieved, that would be up around 41% from the 1.3 million sales reported in 2023. While impressive, that would mean Tesla would fail to achieve its goal for around 50% annual growth in deliveries for yet another year.

The series of price cuts and other incentives such as rebates appear to have kept demand on the right trajectory, but the number one question this earnings season is how big of an impact this is having on profitability.

Tesla has already said it is willing to sacrifice some of its market-leading margins to support growth and profitability has already been eroded since peaking just over a year ago. Markets think its gross margin will hit its lowest level since the start of the pandemic in the second quarter, while its operating margin is forecast to sink to a two-year low.

However, markets are optimistic that Tesla has introduced the bulk of its price cuts this year and think the second quarter will be the trough for both metrics, believing margins will start to climb again in the second half.

(Source: Company reports, with estimates from Bloomberg)

The outlook suggests Tesla shares could keep up the momentum in the second half of 2023 if it can meet expectations, underpinned by growing deliveries and a recovery in margins. Any potential economic slowdown is a threat to this, and the intensifying competition (especially in China) could force it to make more price reductions to lure buyers.

We also have the Tesla Semi and Cybertruck set to be launched before the end of the year, providing two highly-anticipated models that could provide fresh momentum as Tesla enters 2024. Investors will want to hear that everything remains on schedule following several delays to both vehicles in recent years.

Will Tesla invest in India?

We may hear some questions fielded about India. The electric carmaker is discussing an investment proposal with the Indian government about establishing a factory large enough to produce about 500,000 vehicles a year, according to a report from the Times of India. Some of those vehicles could be exported to other countries in the Indo-Pacific region. India has been pushing its red line that Tesla must produce cars locally if it wants to sell them in the country. CEO Elon Musk and prime minister Narendra Modi met last month to discuss investment opportunities.

Tesla stock: Is it shifting to sum-of-parts valuation?

The other parts of Tesla’s business are also coming more into play as they gain traction, led by the excitement around the potential of its charging network across North America after a string of automakers including General Motors, Ford, Rivian and Mercedes-Benz agreed to adopt Tesla’s charging connector and secured access to its 12,000-strong Supercharger network from next year. Analysts believe this could contribute significant sums in revenue by the end of the decade as drivers of all sorts of electric vehicles use its Superchargers, although margins are expected to be slim. Still, it has thrusted another part of Tesla’s business under the spotlight and signalled Tesla is setting the standard across the industry.

Tesla’s energy business has also grown significantly as it continues to expand its solar farms, and The Telegraph recently reported that the company is planning on launching a household electricity provider in the UK to suggest it has big plans in the pipeline.

Is Tesla an AI stock?

Tesla has also kept its AI ambitions under wraps, but CEO Elon Musk said earlier this year that he believes Tesla is the leading AI company and that the firm will experience its own ‘ChatGPT moment’ within the next year or so. Its self-driving technology, which Musk has said will underpin the future of Tesla, is thought to be the key but we know Tesla is also working on other projects, like its humanoid robot.

Where next for TSLA stock?

Tesla shares have risen 2.5-fold since the start of 2023, making it the third best performer in the both the Nasdaq 100 and the S&P 500.

The stock hit a nine-month high earlier this month but has found it more difficult to keep climbing. The supportive trendline that can be traced back over the past two months continues to hold, but there are signs that momentum is waning, most notably the decline in trading volumes over the last three weeks. The stock is also approaching the highest price targets on Wall Street at around $300, although it is already well over the average target of $214.

The stock remains on course to climb toward the 61.8% retracement at $295 if the supportive trendline holds, with the peak seen in the second-half of 2022 at $312 in view after that. A pullback could see it swiftly drop back toward the 50% retracement at $258.

Nasdaq 100 outlook: Where next?

The Nasdaq 100 has found some new momentum and hit fresh 18-month highs today, with markets becoming more optimistic that inflation is easing, interest rates are approaching their peak and that a severe economic downturn can be avoided.

The rally has taken the index firmly over the 78.6% retracement and has opened the door for the index to keep climbing back toward the all-time highs we saw in late 2021 if it can keep up the momentum. We could see 15,650, marking the level of resistance seen in September 2021, act as a midway target.

The RSI is once again in overbought territory to suggest we could see some pullback before more gains are made. The 78.6% retracement at 15,300 should provide some support if it comes under pressure but any slip below here risks a sharper decline toward the 50-day moving average at 14,400, with the 61.8% retracement at 14,300 there to provide a safety net.

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