October is set to be a critical month for Tesla. It’s been a rough year for the EV maker’s stock, but a new optimism related to next month's Q3 earnings release helped drive shares up 5% on Monday, erasing their previous year-to-date losses.
The recent shift in sentiment around Tesla comes in part from the company's status as an AI darling for several high-profile tech bulls, which has helped drive anticipation for the long-awaited “robotaxi day” on Oct. 10. That's when Tesla is expected to provide updates on what it calls its “full self-driving” software at the event, as well as a demonstration of its planned autonomous “cyber-cab.”
To remain profitable, however, Tesla will need to sell cars to use that software. While news on that front has been very mixed in 2024, Barclays analyst Dan Levy predicts quarterly deliveries will come in around 470,000 vehicles, up 8% from the same quarter last year and beating Wall Street's expectations.
For investors, it was a welcome contrast to last quarter, when deliveries fell 5% year-over-year. Those numbers did beat the Street’s expectations, briefly pushing the stock higher. A few weeks later, however, a disastrous earnings call erased those gains as the stock plunged 12%, its worst single-day performance since 2021.
Analysts had wanted to hear about declining revenues and margins. Instead, they got a long-term pitch about next-gen EVs and AI investments from Musk.
Wedbush Securites’ Dan Ives, a noted Tesla bull, called those earnings a “train wreck.” Baird managing director Ted Mortonson told Fortune he thought Musk seemed defensive.
It appears the world's richest man might be in a better mood for the company's Q3 call on Wednesday. The stock has recovered to trade just short of the $250 mark, down only slightly from its 52-week high of $271. Its performance still lags well behind the 21% year-to-date gains of the S&P 500, however, and the recent rounds of poor earnings results have many, including Fortune’s Shawn Tully, wondering whether the stock is overvalued.
Will China's software ban help or hurt Tesla?
This year has also been filled with reports about Tesla’s declining market share in the U.S., China, and Europe, though Levy’s note said increased deliveries in China this quarter would make up for weak EV sales generally in the European Union.
As a first mover, it’s only natural for Tesla’s overall market share to decrease as the EV space grows. Nonetheless, a brutal price war that Musk himself launched has emboldened Chinese manufactures like BYD, which is famously backed by Warren Buffett’s Berkshire Hathaway, to go on the offensive.
It remains to be seen how deteriorating trade relations between the U.S. and China will affect Tesla’s business. On Monday, the Biden administration announced the Commerce Department would propose a ban on Chinese-developed software from all internet-connected cars in the U.S.
The move comes after Biden already announced 100 percent tariffs on Chinese electric vehicles in May. Tesla benefits from producing and selling vehicles in both of the world's biggest markets, but it could still suffer collateral damage. Recently, for example, the EU hit Musk’s made-in-China cars with an extra 9% import duty, though other manufactures such as Volvo Car AB parent Geely and BYD were hit much harder.
