Tesla's stock has beaten the S&P 500 lately. Here's what could drive more gains.

By Emily Bary

Investors may be expecting a delivery beat this quarter, but such a performance could still help power Tesla shares higher

When Tesla Inc. reports delivery numbers next week, there will be a different dynamic on Wall Street.

Recently, buy-side investors have been more pessimistic than the sell-side consensus when it came to Tesla's (TSLA) delivery figures. But this time around, the buy side seems to have a rosier view of things, according to Barclays analyst Dan Levy.

Even though investors may have come to expect a third-quarter delivery beat from Tesla, such a result could help drive shares higher, Levy said. While they're about flat on the year, shares have risen 36% over the past three months, beating the S&P 500's roughly 5% gain over that time.

That recent rally for Tesla shares includes a nearly 5% run in Monday action that's best in the S&P 500 as of midday.

"We believe that a beat could drive further strength of the stock into Robotaxi Day, serving as a reminder that at least for now concerns on fundamentals have dissipated," he wrote.

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There are still various challenges for Tesla's automotive business, including weakness in Europe that reflects a roll-off of some subsidies. But there are also some incrementally positive developments, such as "surprisingly robust" performance in China and a better-than-expected ramp of the Cybertruck in the U.S., according to Levy.

He's also intrigued by the company's stance on incentives, noting that Tesla had been using incentives in past quarters to spur sales but didn't do that so much in the ongoing quarter.

"We believe incentives have been a key driver of maintaining demand amid a number of macro headwinds and softened consumer interest in [electric vehicles]," Levy wrote. "We see the potential for Tesla to launch further incentives globally to close out the month as needed, keeping in mind our belief that [management] is likely highly motivated to meet/beat consensus estimates on [third-quarter] volumes ahead of Robotaxi Day."

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Levy himself is slightly ahead of the consensus view with his own delivery estimate of 470,000, versus the 461,000-unit FactSet consensus. He thinks a number around his projection would set Tesla up to post roughly flat volumes for the year. Doing so would necessitate a record 500,000 deliveries for the fourth quarter, he noted, but that's "likely achievable."

In all, investors seem to be focusing more on Robotaxi Day and the general big-picture themes of artificial intelligence and autonomy, rather than Tesla's core automotive business, he said. The Robotaxi Day event is expected to take place in October and feature information on the company's plans to develop autonomous-taxi capabilities.

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-Emily Bary

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09-23-24 1255ET

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