Wall Street grows more optimistic about Tesla sales. Should you?

By Claudia Assis

Tesla's China sales are expected to be the highlight of the quarter

Investors expect Tesla Inc. to report third-quarter deliveries, its proxy for sales, sometime in the next week, and Wall Street analysts have raised their expectations in recent days.

Tesla (TSLA) has long made a habit of not setting a definite date for the quarterly deliveries and production data.

It reports the numbers by car model, but does not break them down further by region or in any other way. In recent reports, it only has grouped the data by Model 3 and Model Y sales, along with "other models."

Regardless, the data is closely scrutinized, and Tesla stock tends to react to it.

Joseph Spak at UBS is forecasting deliveries of around 470,000 Tesla vehicles for the quarter, which compares to expectations of 421,000 he had in his model as a placeholder.

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"Based on investor conversations, we believe the buy-side expectation range is [about 465,000 to 480,000 vehicles], so we are toward the lower end," Spak said in a recent note.

Consensus according to FactSet hovers around sales of 462,000 vehicles. That would compare with sales of 435,000 EVs in the third quarter of 2023, or a 6% increase.

In the U.S., Tesla is offering financing promotions to help move its vehicles, Spak said.

Analysts at Piper Sandler, led by Alex Potter, also increased their expectations for Tesla quarterly sales in recent days, calling for the delivery of about 459,000 vehicles.

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For the full year, they expect Tesla to sell about 1.75 million vehicles, which is an increase of about 23,500 vehicles from their previous estimate.

"In China, Q3 seems likely to be Tesla's best quarter ever, and although sales in Europe are weak, Cybertruck deliveries are supporting demand in the United States," the Piper Sandler analysts said.

The China estimates are based on weekly registration data, so there's "high conviction" that Tesla will have delivered about 175,000 vehicles in the quarter.

While the sales trends are "material" for Tesla's profits, they will likely be overshadowed "by robotaxi discussions between now and Oct.10, when Tesla hosts its long-awaited robotaxi unveiling event," Potter said.

Deutsche Bank analysts said they expect the unveiling of a "CyberCab" at the event, or "some type of robotaxi demo," as well as updates on operating parameters such as cost per mile, scale and a timeline. They also expect Tesla to unveil a cheaper, "Model 2" EV.

"Overall, our bias leading up to the event has been positive. However, coming out of the event, we would be tactically cautious as the bar seems quite high and could envision a 'sell the news' type of market reaction," they said.

Analysts at RBC Capital, led by Tom Narayan, recently raised their Tesla sales expectations as well, to 460,000 vehicles, a 1.3% increase from an earlier estimate.

They also hope for a good show in China, forecasting third-quarter sales up 24% as compared with second-quarter sales. Tesla sales grew in China in July and August, and September's weekly insurance data is suggesting another upswing, they said.

At the time of release, Tesla usually also sets the date for quarterly earnings. The stock is up 2% this year, underperforming the S&P 500 index SPX, which has gained 20% in the same period.

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-Claudia Assis

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09-27-24 0600ET

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