How will TSLA stock react to Q3 earnings?

Tesla’s (NASDAQ: TSLA) stock is struggling to hold above $220, with this week’s Q3 earnings report likely to determine its next move.

The stock ended the October 18 session valued at $220.70, down less than 0.1%. This has extended its losses over the past month, during which TSLA has dropped by over 11%. 

In premarket trading on October 21, Tesla’s stock price was down almost 1.3%.

What to expect from Tesla’s Q3 earnings report 

As the EV maker prepares for its earnings report on October 23, it’s worth noting that the company has underperformed in recent weeks after investors reacted negatively to a disappointing delivery report and the much-anticipated Robotaxi event.

For the quarter ending in September, Tesla delivered 462,890 units, reflecting a 6% year-over-year increase but falling short of analysts’ expectations of 463,310. Additionally, the Robotaxi event was criticized for not meeting expectations, particularly due to the lack of a clear roadmap for the company’s autonomous driving technology.

Now, Elon Musk and his team face the challenge of reporting strong earnings to regain investor confidence. A positive report is needed, considering TSLA saw capital outflows following the Robotaxi event.

Analysts estimate that Tesla will report revenue of $25.4 billion, up from $23.4 billion in the same quarter last year. However, concerns about plateauing revenue persist. 

Earnings per share (EPS) are expected to drop by about 10% year-over-year, between 48 and 53 cents a share. Net income is projected to land at $1.68 billion, compared to $1.85 billion last year.

Impact on TSLA share price

CyclesFan, a market analyst, pointed out in an October 20 X post that predicting Tesla’s stock price ahead of an earnings report has been challenging historically. 

While TSLA held above its 20-week moving average in the past week’s trading sessions, the analyst expressed caution ahead of the report, citing Tesla’s underwhelming delivery numbers as a potential red flag.

If the stock closes below the 20-week moving average, technical indicators caution that Tesla could be vulnerable to further downside, potentially targeting the lower Bollinger Band at $171 in November. 

From Wall Street, Bernard Zambonin, a research analyst for DM Martins Research, believes Tesla has an opportunity to redeem itself after the recent lackluster market reaction.

 While Zambonin maintains a ‘Hold’ rating, he acknowledged potential headwinds related to the company’s margins—a challenge facing the broader auto industry—and suggested earnings day may have a limited impact on the stock’s movement.

“I believe that as the market’s attention increasingly shifts to the bottom line, the company’s margins are likely to come under pressure in Q3 due to ongoing headwinds in the auto industry. This could lead to a negative reaction, although some surprises may emerge, such as regulatory credits and strong growth in its energy storage business,” he said. 

TSLA’s stock bullish outlook 

Despite these differing outlooks, there is general agreement that Tesla’s long-term prospects remain bullish. Wedbush Securities analyst Dan Ives considers the recent deliveries report a positive step, though he noted that expectations were for the company to exceed estimates by a wider margin.

Ives also highlighted that the recent Robotaxi event earned Tesla an “Outperform” rating and a $300 price target. 

He projects Tesla reaching a $1 trillion valuation, citing the impact of products unveiled at the event, including the Cybercab prototype, a larger Robovan, and advancements in full self-driving (FSD) technology. 

However, concerns about FSD’s future persist, particularly as Tesla is under investigation for crashes involving the system.