Tesla (NASDAQ:TSLA) is expected to publish its Q1 2023 earnings on July 19, reporting on a quarter that saw the company report a record number of deliveries. We expect Tesla’s revenues to come in at $24.7 billion, slightly ahead of consensus estimates. This would mark year-over-year growth of about 45%. Earnings are likely to come in at about $0.87 per share, roughly in line with the consensus. See our interactive dashboard analysis on Tesla Earnings Preview for more details on how Tesla’s revenues and earnings are likely to trend for the quarter. So, what are some of the trends that are likely to drive Tesla’s results?
Tesla has already reported delivery numbers for Q2 2023, indicating that deliveries grew 83% year-over-year to 466,140 units. While the growth rates were driven in part by a favorable comparison with Q2 2022 when the company’s Chinese business declined sharply amid strict Covid-19-related lockdowns, Tesla has also likely benefited from price cuts on popular models and an expansion of manufacturing capacity. For perspective, Model Y presently sells at more than 20% below last year’s prices. Moreover, the Model 3 and Y are also eligible for the $7,500 tax credit under the Inflation Reduction Act in the U.S. and this is also making Tesla’s EVs more accessible to a broader customer base. The ramp-up of production at Tesla’s factory in Texas is also helping supply to an extent. While higher volumes are positive, Tesla’s average selling prices are likely to trend meaningfully lower and this is also likely to impact margins over Q2. Automotive gross margins over Q1 2023 stood at 19.3%, down almost 10% compared to the year-ago quarter and we should see a similar year-over-year decline over Q2 as well.
While Tesla stock could trend marginally higher if it beats earnings estimates, we think that the stock is a bit overvalued at current levels. Although we continue to believe that Tesla will remain a big beneficiary of the long-term transition to electric vehicles given its well-oiled supply chain, superior electric drivetrains, and its lead with software and self-driving technology, we are presently negative on Tesla stock with a $210 price estimate, which is about 23% below the current market price. Tesla stock has already gained over 2x year-to-date and presently trades at about $274 per share, or at over 78x forward consensus earnings, which is slightly high, in our view. Tesla’s earnings for 2023 are also projected to decline year-over-year as automotive margins face pressure. See our analysis on Tesla Valuation: Is TSLA Stock Expensive Or Cheap? for more details on Tesla’s valuation and how it compares with peers. For more information on Tesla’s business model and revenue trends, check out our dashboard on Tesla Revenue: How Does TSLA Make Money?
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