Tesla 2024Q3 Margins Likely to Face Continued Headwinds

Insights - Tesla will release its fiscal Q3 2024 earnings after the U.S. market closes on October 23. Analysts remain focused on fundamentals, with margins expected to decline further. 

Tesla’s Q3 revenue is projected at $25.42 billion, up 9% year-over-year, with EPS expected at $0.51, a 4% decline. 

Q3 Vehicle Deliveries Beat Expectations, Margins Likely to Decline

Tesla delivered 463,000 vehicles globally in Q3, a 6.4% year-over-year increase. However, promotions are expected to lower average selling prices, leading to further margin declines.

As Tesla’s main revenue driver, the automotive business continues to face challenges from intense competition and weakening consumer demand. The company’s Q3 promotions are expected to further drag down the average selling price of its vehicles, leading to a decline in margins this quarter.

Tesla’s Robotaxi vehicles face cautious market sentiment due to unclear commercialization prospects, which caused the stock to drop sharply after their introduction at a previous event. Analysts believe the technical details and commercialization path of autonomous vehicles remain uncertain, offering limited upside surprises.

Here Are the Analysts' Views

Barclays expects Q3 vehicle sales to be flat, with margins at 15.2% and EPS of $0.68, exceeding market expectations. This firm believes Tesla’s profit margins have likely "bottomed out" and are expected to improve, citing regulatory credit income as a potential growth driver, steady growth in the energy business, and recent layoffs that will reduce Tesla’s expenses.

Mizuho Securities recently maintained its neutral rating and $230 price target, while Morgan Stanley raised its target to $310.

Tesla's stock dropped 8% after the Robotaxi event. The stock was up 0.22% at $221.38 Tuesday pre-market. Based on Mizuho Securities' latest forecast, this suggests the stock could rise by less than 1%.