Will Tesla Beat Wall Street Earnings Expectations for Q2?

In recent weeks, a number of Wall Street analysts have raised their price targets on Tesla, along with their second-quarter earnings estimates. Even with these, some believe Tesla could be poised to outperform Q2 earnings predictions, just like it did with deliveries in the quarter.

Above: Two Tesla vehicles parked next to each other (Image: Casey Murphy / EVANNEX).

Tesla could be set for an earnings beat when it reports its Q2 earnings on July 19, according to a recent story from Barron’s. The article cites recent price target and earnings increases from Jefferies analyst Philippe Houchois, who raised his price target to $265 from $185, and increased his 2023 full-year earnings estimate to $2.83 per share from $2.71.

Despite the increases Houchois rates Tesla stock a Hold, noting that its valuation is high. At the beginning of the year, Tesla shares were trading around 25 times the expected earnings in the coming year. In late April, shares jumped to about 40 times the expected 12-month earnings, which is also when Houchois dropped the stock from a Buy to a Hold. Currently, Tesla shares are trading for roughly 65 times the estimated earnings.

Still, Houchois predicts that Tesla’s profit margins bottomed out in Q2 following the company's sweeping wave of price cuts. In Q1, price cuts led to Tesla’s profit margin falling to 21 percent for a drop of almost 12 percentage points. While Tesla margins bottoming out is a good sign, optimism surrounding the automaker’s artificial intelligence and future autonomous driving profits have made the stock more expensive as shares have risen in recent weeks.

Average analyst price targets on Tesla have jumped to roughly $221 per share, after dropping as low as about $190. Tesla began the year with stock price targets at roughly $255 per share. Recent news surrounding charging partnerships and record Q2 deliveries came as positive, and Tesla shares have subsequently risen in the weeks since.

Above: Tesla (TSLA) Stock Chart (Interactive Image: TradingView.com).

Tesla delivered roughly 466,000 units in Q2, outpacing Wall Street estimates averaging 445,000 before the report was released. With price targets increasing by about $7 per share in the weeks since the beat, many analysts have boosted their price and earnings targets like Houchois. Projected 2023 earnings per share on Tesla are up to roughly $3.40 from $3.38.

Barron’s notes that, while a $0.02 projected earnings increase is small, it’s not common for analysts to change their predictions between a delivery and earnings report. Currently, analysts are forecasting Tesla to reach $0.79 per share in Q2 earnings, up from predictions of just $0.77 a share prior to the delivery report.

The publication adds that, based on Houchois and other analysts, that number could be closer to $0.90 per share, with Tesla stock up around 123 percent this year.

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