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In a recent note titled Q2: The Next Step in Restoring Bull Thesis, Kallo stated that he likes the Tesla share setup for the balance of the year. The Baird analyst further noted that Tesla’s further execution, starting with its second-quarter earnings report, will “help restore credibility and create a challenging short environment.”
Kallo pointed out that expectations for Tesla stock have become “overly negative” as of late, despite bear arguments shifting to margins following the company’s release of its record-breaking second-quarter production and delivery numbers. Despite these pervading sentiments, the Baird analyst nevertheless believes that the company’s margin results could exceed estimates, which would likely be viewed favorably by investors.
Tesla’s second-quarter results will likely determine the company’s momentum in the second half of the year. Tesla exceeded expectations in Q2 2019, producing a total of 87,048 vehicles while delivering approximately 95,200 in both the United States and other territories. These figures were notably higher than Wall Street’s estimates. Analysts polled by FactSet, for one, expected Tesla to report a total of 91,000 vehicle deliveries for Q2 2019 in the days leading up to the report’s release.
Tesla’s momentum could be highlighted by the shifting narrative surrounding the company. Just recently, Morgan Stanley ended up adjusting its estimates for Tesla’s Gigafactory 3 operations following a visit to China. After communicating with suppliers, the firm’s analysts admitted that Gigafactory 3, which is currently being built at a rapid rate in Shanghai, could be operational as early as November this year.
What is rather ironic with Morgan Stanley’s findings was the firm’s estimates for Gigafactory 3’s output. In a note, analyst Adam Jonas, who gave Tesla a “worst-case” price target of $10 in the second quarter, stated that the electric car production facility would likely produce 35,000-40,000 Model 3 per year in 2020, and ramp to 60,000 Model 3 per year in 2021. That’s a run-rate of 673-769 Model 3 per week in 2020 and 1,150 Model 3 per week in 2021. Considering Gigafactory 3’s scale, Morgan Stanley’s estimates seem curiously low.
Tesla’s second-quarter earnings report is set to be released after market close on Wednesday, July 24, 2019. It should be noted that the Q2 earnings call has been moved one hour to 3:30 p.m. PT (6:30 p.m. ET).
As of writing, Tesla stock is trading -0.42% at $254.80.
Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.