The disappointing Robotaxi launch event, can Tesla regain market confidence with this week's financial report?

The Tesla earnings report for this week is highly anticipated by the market. Following the disappointing Robotaxi launch event, the market's focus has shifted back to the fundamentals - demand outlook and profit situation.

After the US stock market closed on October 23, Tesla is set to announce its third-quarter performance. Market expectations are that Tesla will achieve revenue of $25.57 billion in the third quarter, a year-on-year increase of 9.5%; expected earnings per share are $0.58, a year-on-year decrease of 12.1%.

At the same time, analysts point out that in the intensifying competition, high production costs and aggressive pricing strategies will squeeze profit margins. Tesla's third-quarter gross margin is expected to decrease to 15%, compared to 18% in the second quarter.

In addition to the profit situation, Musk's comments on the timing of the launch of affordable electric vehicles, as well as the progress of FSD, energy storage business, and robots, Robotaxi, are also highlights. Analysts suggest that Musk's detailed views on the financing and mass production of Robotaxi and Optimus during this earnings call could have a positive impact on the stock.

Little hope for profit improvement, gross margin may further decline

Mainstream Wall Street views comment that Tesla lacks "delivery results or incremental revenue drivers" for Robotaxi, and investors will "re-focus on the company's fundamentals", but the company's fundamentals are not satisfactory. The disconnect between Tesla's high valuation and profit growth is becoming more apparent.

In terms of delivery volume, although Tesla's previously announced delivery volume reversed the downturn of the first two quarters, achieving year-on-year growth, it did not meet market expectations, with a 2.3% year-on-year decline in sales volume for the first three quarters of this year. The increase in sales volume in the third quarter is related to aggressive promotions, which will inevitably lower profit margins.

In terms of profitability, due to the continuous headwinds facing the automotive industry, the company's third-quarter profit margin may come under pressure.

It is worth noting that in the intensifying competition, aggressive pricing strategies may compress profit margins. GLJ Research analyst Gordon Johnson predicts that Tesla's gross margin will decrease to 15%, while the company's gross margin reported in the second quarter was 18%.

However, there are also optimistic forecasts. Barclays analysts express confidence in exceeding expectations for the third quarter performance, believing that the profit margin has "bottomed out" and that the third-quarter performance could be a recent "positive catalyst".

Affordable models, FSD, Robotaxi are key points of the conference call

The focus of this conference call will be Musk's comments on the timing of the launch of affordable models, as well as the latest developments in FSD, energy storage business, and Robotaxi.

Tesla held the highly anticipated "Robotaxi day" event this month, but the results presented did not satisfy Wall Street. The autonomous taxi lacked key details, the humanoid robot relied on manual control, the eagerly awaited affordable models were absent again, and information on the performance improvement of the Full Self-Driving (FSD) system was missing, leaving Wall Street's expectations unmet.

Bernstein analyst Toni Sacconaghi described the event as "disappointing, shocking in its lack of detail". William Blair analyst Jed Dorsheimer stated that the event "hardly had any content to suppress short interest in the short term" Elon Musk stated that he expects to launch fully autonomous, unsupervised driving technology in Texas and California next year, with the initial models being the Model 3 and Model Y. He also mentioned that the company expects to start producing Cybercabs before "2027". However, the timeline he provided is quite vague, as he only expressed optimism towards the timeframe.

Analysts pointed out that any detailed insights provided by Musk during the earnings call on the financing and mass production strategies for Robotaxi and Optimus could have a positive impact on the stock, even if it falls short of market expectations.

Energy Storage Business May Bring Surprises

Despite the gloomy profitability, there may still be some positive surprises in the future.

One area of interest in the market is the energy storage business, which may provide necessary support during Tesla's strategic shift. The company deployed 6.9 GWh of energy storage in the third quarter, a 72.5% increase from the 4 GWh in the third quarter of 2023, indicating strong performance in this sector.

The strong performance of the energy storage business is expected to enhance the third-quarter performance , with analysts forecasting that the revenue from the energy storage sector will reach $2.17 billion, a 39.1% year-on-year increase. It is worth noting that this sector is highly profitable, with a high profit margin. The energy storage gross margin in the second quarter was approximately 24.55%, significantly higher than the company's overall 17.95%