What To Expect When Tesla's Q3 Report Drops Next Week

Tesla Inc TSLA is scheduled to release its fiscal-year 2020 third-quarter results Wednesday, Oct. 21 after the market close.

Key Tesla Q3 Metrics: Analysts, on average, expect the electric vehicle manufacturer to report non-GAAP earnings per share of 56 cents, higher than the year-ago EPS of 37 cents.

Revenue is expected at $8.26 billion, up 31% year-over-year from the $6.3 billion reported for the third quarter of 2020.

Tesla is likely to report above-consensus third-quarter results, which could serve as a positive catalyst for the stock, Credit Suisse analyst Dan Levy said in a recent note.

The analyst estimates non-GAAP EPS of 73 cents. 

Goldman Sachs analyst Mark Delaney said auto OEMs, including Tesla, are benefiting from improved auto demand. 

Goldman is expecting EPS of 60 next week. 

Third-quarter profit is important for Tesla, as it may want to show it can maintain profitability despite lower regulatory credit revenue, Credit Suisse's Levy said.

Tesla's overreliance on credit revenue has been the pushback on the company's potential selection for the S&P 500 Index, the analyst said.

Related Link: Tesla Analyst Sees Disconnect Between Share Price, EV Company's Fundamentals

Tesla's Margin Central To Outperformance: Tesla's gross margin is at the center of the anticipated EPS beat, as greater volumes boost the margin, Levy said.

Third-quarter gross margins — excluding credits — are expected to land at 20.9%, up two points sequentially, the analyst said. 

2020 Delivery Target A Stretch? Tesla's annual production target of 500,000 vehicles will be hard to achieve, as the company may have to produce near capacity for all of the fourth quarter, Levy said.

The analyst does not expect the company to take down the target on the earnings call. Levy forecast full-year volume of 486,000.

The same view was previously stated by Needham analyst Rajvindra Gill, who said the fourth-quarter quarter-over-quarter shipment growth of 30% that's needed to hit the company's full-year deliveries target is unlikely, as the average and median seasonality suggest 9% and 14% growth, respectively.

Credit Suisse's Levy said that even if Tesla misses the 500,000-vehicle delivery target, investors are likely to continue to see the longer-term growth narrative as being intact. 

Tesla reported earlier this month record third-quarter deliveries of 139,000.

Credit Suisse has a Neutral rating and $400 price target for Tesla shares.

TSLA Price Action: At last check, Tesla shares were down 3.12% at $446.93. 

The stock nearly doubled in the third quarter and is up over 450% year-to-date.

Related Link: Tesla Has State Government Invite For Giga, R&D Hub In Bangalore

Photo courtesy of Tesla.