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Investors hope the forecast for Tesla coming out of its first-quarter earnings report due Wednesday calls for blue skies.
Saul Loeb/AFP via Getty Images
Electric vehicle leader
Tesla
is expected to report lower earnings on higher sales Wednesday evening after the electric vehicle maker slashed prices to draw in buyers.
The EV war, with traditional auto makers spending billions to catch
Tesla
(ticker: TSLA), has morphed into a price war. The car maker’s quarterly earnings will help investors figure out who is winning.
Wall Street is looking for per-share earnings of about 85 cents from $23.7 billion in sales for Tesla, according to FactSet. A year ago, Tesla reported $1.07 a share from $18.8 billion in sales.
Tesla earnings cut prices significantly for its vehicles in January and lower prices pressure profitability. Analysts project first-quarter automotive gross profit margins just north of 20%, down from roughly 25% in the fourth quarter of 2022 and more than 30% in the first quarter of 2022.
Margins north of 20% will be important for investors, so will management commentary about margins for the balance of the year. On the company’s fourth-quarter conference call in January, CFO Zachary Kirkhorn indicated that Tesla could keep automotive gross profit margins above 20% in 2023. That was a full-year outlook. He didn’t break down his guidance by quarter. At minimum, investors would like Kirkhorn’s January view reiterated.
Investors might have to wait for the conference call to get that detail. The call is slated to start at 5:30 p.m. Eastern time.
On that call, investors will also want to hear about order activity and demand following vehicle price cuts. CEO Elon Musk said on the Q4 call that orders were coming in at twice Tesla’s manufacturing capacity. Demand still exceeding supply will be another thing investors want to hear Wednesday.
Higher demand can dull the sting of lower earnings. Tesla hasn’t reported a year-over-year decline in adjusted earnings since the third quarter of 2019, according to Bloomberg. Tesla reported 6 cents in per-share earnings that quarter, compared with 13 cents the year before.
Tesla price cuts have had an impact on the entire auto industry. Earnings at
General Motors
(GM) and
Ford Motor
(F) are expected to drop year over year in 2023. Ford and GM, however, still make most of their money from selling conventional trucks and SUVs. Just how must those businesses are impacted by Tesla’s EV price cuts is something else for investors, analysts and Tesla management to discuss.
Whatever Tesla management says, investors should brace for volatility. Options markets imply shares will move about 8%, up or down, following earnings. Tesla stock has moved almost 8% on average over the past four quarterly reports. Shares have risen three of those times and fallen once over that span.
Shares rose 11% the day after the company reported fourth-quarter numbers. Tesla stock is up another 15% from that point. The gains leave Tesla stock up roughly 50% year to date, coming into Wednesday trading. It has been quite a run after share dropped 65% in 2022. The
S&P 500
and
Nasdaq Composite
have risen about 8% and 16%, respectively, so far this year.
Write to Al Root at [email protected]
A multi-lingual talent head, Allen is fluent in languages such as Spanish, Russian, Italian, and many more. He has a special curiosity for the events and stories revolving in and around US and caters an uncompromising form of journalistic standard for the audiences.