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Tesla Earnings Preview: Interest Rates, Robotaxi, Cybertruck

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Electric vehicle (EV) king Tesla ((TSLA - Free Report) ), perhaps the most significant bull/bear battleground stock on Wall Street, will report earnings tonight after the market close. Tesla’s stock performance is mixed, depending on who you ask and their investing timeframe. For those with a long-time horizon, the performance is undeniable. Tesla stock is up a scorching 19,500% since it became public in mid-2010. However, times have been more challenging since 2021, and the stock, which currently trades at ~$250, is well off its split-adjusted all-time high of $414.50. Nevertheless, the stock is showing signs of life again, gaining nearly 40% over the past month and ripping through its 200-day moving average – a critical trend filter.

 

Has Tesla Turned the Corner?

Over the past few years, Tesla has been the worst-performing stock within “The Magnificent 7,” a list that includes big tech juggernauts such as Nvidia ((NVDA - Free Report) ) and Microsoft ((MSFT - Free Report) ). Below, I will cover some of the items to watch in tonight’s earnings release.

 

Margins: Stabilization or Continued Downtrend?

Sky high interest rates have been a significant headwind for Tesla. To clear inventory, CEO Elon Musk and the Tesla team have been forced to offer steep price cuts and incentives to clear inventory and spur on higher sales.

Zacks Investment Research
Image Source: Zacks Investment Research

Investors should pay close attention to what the company says about its pricing moving forward. The CME FedWatch Tool, a tool that ascribes odds to monetary policy, suggests that there is a very high chance Jerome Powell and the Fed cut rates in September. In other words, TSLA may soon see the light at the end of the interest rate tunnel.

 

Robotaxi Update

Elon Musk has made it clear that he is all in on his bold vision to make Tesla the pioneer in the autonomous robotaxi market. On July 11th, TSLA plunged more than 8% after Musk delayed the unveiling of the highly anticipated robotaxi. However, anyone who has read Walter Isaacson’s biography understands that unrealistic deadlines are often par for the course for visionary CEO Elon Musk.

 

Wall Street Expectations & Stock Reaction

Tesla has missed Zacks Consensus Estimates for three consecutive quarters. However, last quarter, shares rallied as investors bet that the worst is already priced into the stock. In my experience, when a stock rallies after missing expectations, as Tesla did, it is a bullish sign. That said, we will get more evidence this quarter.

Zacks Investment Research
Image Source: Zacks Investment Research

 

Cybertruck

Tesla began delivering its over-the-top Cybertruck SUV in late 2023. Will the eccentric SUV catch on, or will it fall flat?

 

Asia Competition

Musk has voiced concerns about strong Chinese EV competition such as Nio ((NIO - Free Report) ) and BYD Co. ((BYDDF - Free Report) ). Can Tesla compete in a now ultra-competitive market with cheaper Chinese alternatives? Tesla investors should also look for any commentary about competition from hybrid vehicles.

 

Bottom Line

Lower expected interest rates will likely be a bullish catalyst for Tesla into 2025. However, investors should watch Tesla’s EPS report closely to get more confirmation that the stock has turned the corner.

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