Tesla (NASDAQ:TSLA) is gearing up to release its latest quarterly report this Wednesday after the market closes, with investors watching closely. After the much-hyped robotaxi event failed to meet expectations, the question now is whether these results can deliver the boost the event was originally supposed to provide.
According to Piper Sandler’s 5-star analyst, Alexander Potter, that remains to be seen.
“The stock has fallen by ~15% since peaking prior to the event, and the likelihood of additional downside will depend, in our view, largely on gross margin,” the analyst explained. “We expect gross margin to rise vs. last quarter, but if we’re wrong, the next several months could be choppy at best.”
Potter is expecting a 50bps sequential improvement for automotive gross margin (excluding regulatory credits), thereby reaching 15.1%. Should that happen, the analyst thinks the stock could “rise modestly, or at least trade sideways,” in reaction to the results.
On the other hand, should gross margins decline quarter-over-quarter, Potter warns the stock’s valuation could face continued pressure for months. The bleeding, according to the analyst, will stop when Tesla introduces a new product or offers more concrete details about the Model 2 – the company’s more affordable, entry-level vehicle.
“An even more meaningful catalyst would involve Tesla disclosing take-rates for full self-driving (FSD) software,” Potter further added, “ideally coupled with evidence of an upward inflection. Regulatory approval for FSD in a new region (e.g. China) would also help.”
Regardless of the Q3 results, Potter believes a “sustainably bullish re-rating” may take time, only occurring when the company provides solid reasons for upward estimate revisions. “We do expect these reasons to emerge in the next year — but perhaps not during the Q3 call itself.
Potter remains one of the Street’s biggest TSLA bulls, with an Overweight (i.e., Buy) rating and joint Street-high price target of $310. Should the figure be met, investors will be pocketing returns of ~42% a year from now. (To watch Potter’s track record, click here)
The TSLA bulls, however, are not the major force on Wall Street at present. The stock only claims a Hold consensus rating, based on a mix of 16 Holds, 11 Buys and 8 Sells. Going by the $207.83 average price target, Tesla shares have a downside of 5% over the one-year timeframe. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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