(Reuters) – Tesla Inc’s quarterly report on Wednesday is likely to show whether the Elon Musk-led electric carmaker has faced any weakness in demand that is beginning to weigh on the auto industry as a whole.
Decade-high inflation, rising electricity bills in Europe and signs of a weakening Chinese market have raised doubts among some analysts about whether Tesla can weather the economic downturn and continue to raise prices without hurting sales.
Despite Musk saying Tesla has “no problem with demand,” the company’s latest supply report showed it made 22,000 more electric cars than it delivered to customers in the third quarter. He blamed the rising stockpile on transportation-related issues.
Demand for Tesla vehicles in China, the world’s largest auto market, is a major concern among Wall Street analysts, as the electric car maker faces stiff competition from domestic rivals BYD, Nio Inc and XPeng Inc.
“The big concern right now is demand in China as wait times appear to be easing,” RBC Capital Markets said. “The question is whether this is a tipping point or a sign of a larger shift among consumers.”
Globally, there are fears that car sales could lose momentum in the coming quarters as rising interest rates and a weaker economic backdrop discourage consumers from making big purchases.
Analysts say pricing is a key factor that could help Tesla offset a possible drop in demand and boost profits. (Graph: Tesla’s US demand slump worries Wall Street, https://graphics.reuters.com/TESLA-RESULTS/gkplgrnnnvb/chart.png)
The average selling price of a Tesla Model 3 in the U.S. has risen about 24% since last January, potentially helping the electric carmaker post record third-quarter profits.
Wells Fargo said Tesla is likely to be the biggest beneficiary of the Biden administration’s new consumer tax breaks to boost battery and electric vehicle production in North America.
Earlier this month, Musk also expressed hope for a share buyback when he said on Twitter “Noticed” in response to a call from a large individual investor for a share buyback.
The move could benefit Musk, whose 15% stake in Tesla makes him the largest stakeholder, and help him raise cash to finance a $44 billion deal to take Twitter Inc private.
Some experts say that after the earnings announcement, Musk may need to sell an additional $3 billion to finance the deal.
“If there is a big selloff of Tesla shares by Musk after the earnings, that would be a strong sign that the Twitter deal is close,” said Adam Badawi, a law professor at the University of California, Berkeley.
* Analysts expect Tesla’s third-quarter revenue to rise about 60% to $21.96 billion and earn $1 a share when the company reports results on Oct. 19 – Refinitiv Data
MOOD OF WALL STREET
* Of the 43 analysts covering the company, 27 rate the stock a buy or higher, 10 have a hold rating and six have a sell rating or lower.
* Average price target is $325, up 14% from early 2022.
QUARTER ENDING REFINITIV IBES FACTUAL BIT,
ESTIMATED EARNINGS PER SHARE,
June 30, 2022 0.60 0.76 Bit
March 31, 2022 0.75 1.07 Bit
December 31, 2021 0.79 0.85 Bit
September 30, 2021 0.53 0.62 Bit
June 30, 2021 0.33 0.48 Bit
March 31, 2021 0.26 0.31 Bit
December 31, 2020 0.34 0.27 Missed
September 30, 2020 0.20 0.25 Bit
(Reporting by Akash Sriram in Bangalore and Hyunjo Jin in San Francisco; Editing by Anil D’Silva)