According to a Citi Research analyst, Tesla Inc. is expected to have a “neutral-to-slightly negative” setup for its upcoming earnings report. In comparison, the earnings prospects for General Motors Co. are seen as more compelling.
Concerns over Tesla’s Valuation
Tesla’s earnings report, scheduled for July 19, comes at a time when the company’s shares have more than doubled this year. Bears worry about Tesla’s “stretched valuation,” which could make the stock vulnerable. The upcoming quarter is expected to be impacted by price cuts, and any margin shortfall or unimpressive numbers could potentially affect investor sentiment.
Consensus Expectations and Potential Guidance Revision
Contrary to the bearish sentiment, consensus expectations for the year do not appear particularly aggressive. Additionally, the second-quarter delivery beat provides an opportunity for upward guidance revision. However, the current setup for second-quarter earnings is still considered neutral-to-slightly negative primarily due to the valuation concerns. Nevertheless, without any imminent downward estimate revisions, there is no catalyst for a significant de-rating of the stock.
The Citi Research analyst raised the price target on Tesla shares from $215 to $278 but maintained a neutral rating on them. In contrast, the analyst expressed a more positive view on General Motors (GM), initiating a 30-day upside catalyst watch on the stock. The analyst also mentioned that consensus estimates for GM have risen and sees potential upside due to strong North America pricing. As a result, the target price for GM was increased from $85 to $89, and the buy stance remained unchanged.