Breaking News
Investing Pro 0

What’s The Outlook For Tesla After Yesterday's Disappointing Q3 Earnings Report?

By Investing.com (Haris Anwar/Investing.com)Stock MarketsOct 20, 2022 17:44
uk.investing.com/analysis/whats-the-outlook-for-tesla-after-yesterdays-disappointing-q3-earnings-report-200542148
What’s The Outlook For Tesla After Yesterday's Disappointing Q3 Earnings Report?
By Investing.com (Haris Anwar/Investing.com)   |  Oct 20, 2022 17:44
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
TSLA
+2.28%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Tesla’s latest earnings report has raised doubts that the EV maker is immune to macroeconomic headwinds
  • Shares are down 30% this month on signs that the company is feeling pressure on its margins
  • The EV maker will likely find it hard to break out of its weak spell in the short term

For Tesla (NASDAQ:TSLA) enthusiasts, there doesn’t seem to be much to worry about in the company’s latest earnings report. The world’s largest EV maker is still producing a kind of growth and margins that traditional automakers can only dream of.

Tesla observers, however, saw more disappointment than excitement yesterday—especially in the comments made by CEO Elon Musk in its conference call.

While third-quarter sales jumped 56% to $21.5 billion, the EV company missed analysts’ average estimate of $22.5 billion.

There were also signs that the increasing cost of doing business has started to show up in the company’s gross margin, which narrowed to 27.9% in the quarter, falling short of the 28.4% average analyst estimate.

Beyond these numbers, the maker of Model S and 3 sedans and Model X and Y SUVs also failed to convince analysts that it remains immune to demand weakness in an environment where interest rates are surging, and a global recession looms.

Musk told analysts that while he was looking forward to an “epic end of the year,” downturns in China and Europe have been affecting orders. The CEO added that “demand is a little harder than it would otherwise be.”

Demand Uncertainty

The uncertainty about the demand outlook, combined with Musk’s mismanagement of the Twitter (NYSE:TWTR) deal, is taking its toll on Tesla shares. They lost about a third of their value during the past month.

Tesla Weekly Chart
Tesla Weekly Chart

After the earnings and Musk conference call, analysts were also divided on the company’s near-term outlook.

While reiterating its overweight rating on the stock, Morgan Stanley said that Tesla produced “a very strong quarter,” and an earnings miss was expected as the company deals with inflationary pressures.

Toni Sacconaghi, Bernstein senior research analyst with an underperforming rating on Tesla, said he didn’t get much clarity from the company’s conference call. His note to clients said:

“Answers to many questions on the earnings call were curt and almost dismissive, with CEO Musk instead repeatedly making very bold prognostications about Tesla’s future and capabilities.”

Sacconaghi set his 12-month price target at $150 for Tesla, implying a nearly 30% decline from Wednesday’s close of $222.04. His note added:

“Lead times for cars have come down dramatically, especially in China, and we worry about weaker consumer spending and incremental competition. We believe that Tesla’s order backlog declined in the quarter, pointing to orders lagging current production rates.”

InvestingPro’s models, which value companies based on P/E or P/S multiples or terminal values, indicate that Tesla is trading close to its fair value, and there is some upside potential after its stock’s sharp slide during the past month. The average fair value for the EV maker stands at $247.83, implying a 17% upside potential.

Tesla Fair Value Estimate
Tesla Fair Value Estimate

Source: Investing.com

Bottom Line

Tesla will likely find it hard to break the current bearish spell after its Q3 earnings report. While not entirely terrible, the latest numbers have cast doubts on the assumption that the company is immune from macro headwinds. In this environment, staying on the sidelines and waiting for a better entry point appears to be the better option.

Disclosure: At the time of writing, the author did not own any shares mentioned in this report. The views expressed in this article are solely the author’s opinion and should not be taken as investment advice.

What’s The Outlook For Tesla After Yesterday's Disappointing Q3 Earnings Report?
 

Related Articles

What’s The Outlook For Tesla After Yesterday's Disappointing Q3 Earnings Report?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Rana Tanveer
Rana Tanveer Oct 23, 2022 12:30
Saved. See Saved Items.
This comment has already been saved in your Saved Items
hello boss
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email