Wall Street Grows More Optimistic About Tesla Sales: Should You?

Recent Optimism from Analysts

Tesla Inc. (TSLA) is set to report its third-quarter deliveries—an important indicator of sales—within the next week, and there’s a chorus of increasing optimism from Wall Street analysts. Historically, Tesla has not been known for setting firm dates for its quarterly deliveries and production numbers, but as the anticipated report approaches, it has prompted analysts to adjust their expectations.

Joseph Spak of UBS is leading this optimistic charge, predicting the delivery of approximately 470,000 Tesla vehicles in the upcoming quarter. This projection markedly exceeds his previous placeholder expectation of 421,000. It’s worth noting that the consensus among investors falls within the range of 465,000 to 480,000 vehicles, indicating a generally bullish sentiment, albeit Spak’s forecast lies at the lower end of this spectrum. According to FactSet, the overall consensus sits at about 462,000 vehicles, which represents a modest increase from the 435,000 electric vehicles (EVs) sold in Q3 2023—an uptick of approximately 6%.

Significant Contributory Factors

The optimism surrounding Tesla’s sales performance is significantly influenced by recent promotional efforts in the United States, where the company has begun offering financing incentives to mitigate sales slowdowns. Meanwhile, the outlook for Tesla’s sales in China appears particularly promising. Analysts from Piper Sandler, under the leadership of Alex Potter, predict that Q3 2024 will be the company’s best quarter in China, consolidating Tesla’s position in one of its vital markets. They estimate that Tesla has likely delivered around 175,000 vehicles in China during this quarter, buoyed by registration data trends.

In terms of annual performance, Piper Sandler analysts have raised their full-year vehicle sales forecast to approximately 1.75 million units—an increase of about 23,500 from earlier estimates. They believe that while sales in Europe remain sluggish, the upcoming deliveries of the Cybertruck could sustain demand within the U.S.

The Upcoming Robotaxi Showdown

While the sales figures are undoubtedly critical for Tesla’s profitability, another cornerstone of the company’s future may overshadow these numbers: the upcoming unveiling of the much-anticipated robotaxi. Scheduled for a showcase on October 10, this event is generating buzz, although analysts like those at Deutsche Bank approach it with cautious optimism. They anticipate Tesla may reveal a “CyberCab” or another robotaxi prototype alongside updates on operational parameters such as cost efficiency and scalability.

Deutsche Bank analysts concatenate their positive bias ahead of the event with a cautious note on potential market reactions post-unveiling; they foresee a possible “sell the news” sentiment if the bar set by Tesla’s announcements is perceived as exceptionally high.

A Mixed Bag on International Markets

RBC Capital analysts, led by Tom Narayan, have similarly heightened their expectations for Tesla’s sales in the third quarter to around 460,000 vehicles—an incremental rise of 1.3% from their prior estimate. They foresee significant growth in China, with a year-over-year increase of 24% from Q2 sales. The brokerage’s optimism is founded on observed sales growth in July and August and promising week-to-week insurance data in September.

As the model for quarterly earnings approaches, Tesla generally releases a defined date as part of the announcement, which could generate further investor interest and speculation.

Stock Performance and Investor Sentiments

Despite this bolstered optimism among analysts, Tesla’s stock performance has been somewhat lackluster in 2024, up only 2% year-to-date compared to the S&P 500 index, which achieved a remarkable 20% increase over the same period. This discrepancy poses the question for investor sentiment: with sales expectations rising, is it time to reconsider Tesla’s stock as a viable investment?

In summary, while Wall Street grows increasingly bullish on Tesla ahead of crucial sales reports and forthcoming product unveilings, investors should weigh the excitement against the backdrop of slower stock market performance and broader economic conditions. The potential of the Chinese market, incentives in the U.S., and intriguing product launches will provide essential indicators as investors gear up for what might be a pivotal quarter for Tesla.