With (TSLA) -) Tesla's third-quarter earnings coming after the bell Oct. 18, investors, in the midst of an ongoing price war and weakening quarterly delivery numbers, are feeling decidedly cautious.
Morgan Stanley analyst Adam Jonas wrote in a note last week that investors remain disinterested in the unpredictable hype around the car company's supercomputing efforts and are feeling nervous about the coming Cybertruck, a new model that has been on its way to consumers for years.
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If the Cybertruck meets more delays on its road to mass production and delivery, Jonas said, investors anticipate the price cuts to continue. Already, the average price of a Tesla has fallen by around 25% this year alone, pushing the company's gross margins down from the 24.3% it reported in December 2022. Tesla's gross margins were pegged at 19% in the first quarter of the year, a number Jonas expects to hit 17.5% for the third quarter.
Other analysts anticipate that the margins will continue to fall below 15% into the fourth quarter as Tesla remains committed to eating up market share by slashing its prices.
Wedbush's Dan Ives said that this trend "cannot continue at this pace" into next year.
Despite the earnings beat Tesla posted last quarter, the company's stock fell more than 10% on the news of falling margins.
Gary Black, managing partner of The Future Fund, said Oct. 17 that an "earnings beat does not necessarily translate to a stock increase." Black noted that Tesla has reported a beat in 14 of the past 16 quarters, but that its stock rose the day after earnings only seven times.
The company's stock performance, according to Jonas, will likely be driven by "comments on the forward outlook," rather than the hard numbers in the report.
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And it seems even Cathie Wood of Ark Invest is feeling somewhat cautious going into earnings. Ark Innovation sold 26,248 shares of Tesla Oct. 17, worth just under $7 million. Wood trimmed the holding by nearly $2 million the day before.
Wood has not been afraid to trim Ark's Tesla holdings in the past, in an apparent effort to prevent the holding from exceeding 10% of the fund. Though Tesla remains Ark Innovation's largest holding, valued at more than $672 million, the holding is now weighted at 9.97% of the ETF.
Shares of Tesla, up more than 100% for the year, fell slightly in early trading.
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