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Wall Street Is Growing Wary on Tesla -- What to Expect From Earnings

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It's not just Tesla (TSLA) bears; bulls are also starting to grow wary on Tesla's ability to sell electric vehicles in bulk. 

Tesla shares are down 22% year-to-date to $241 a share, with close to a 5% lift coming Thursday. CEO Elon Musk said in leaked internal email remarks that Tesla has a chance to deliver 100,000 cars in the third quarter, with that number being at the low end of expectations. Tesla will report earnings on Oct. 23.  

But the overall yearly share losses could worsen, if an increasingly loud warning from analysts comes to fruition. 

Thursday Wedbush Securities analyst Dan Ives wrote in a note he believes Tesla will come short of third-quarter delivery estimates.  "All eyes on the Street will be focused on whether the company can deliver... 100,000 units, which in our opinion is an unlikely event," Ives wrote. That's because his demand checks in the U.S. aren't incredibly strong, and a batch of roughly 5,000 to 7,000 potentially sold cars in the E.U. must come in at the front end of that estimate. This "could be a major sway factor" in determining Tesla's ability to meet its quarterly delivery goal. Not helping is what Ives sees as a soft Chinese market. 

Tesla is guiding for between 360,000 and 400,000 deliveries for full-year 2020. Analysts polled by FactSet are looking for roughly 357,000, but Ives thinks selling 345,000 would be "herculean." 

Ives is a bear, with a $222 price target on the stock, but even the bullish Toni Sacconaghi, analyst at Alliance Bernstein, is wary of demand. Saccanaghi sees Jaguar and Audi competing with Tesla enough to steal some market share in the E.U., a trend he pointed out in a late August note. 

With Tesla scrambling to uphold current delivery goals while also cutting costs, the path to consistent profitability isn't exactly a sure bet. But there's another threat to profitability: Pricing. Sacconaghi, who has a $325 price target, mentioned in that note that the average price of the Model S and luxury crossover Model X has fallen 10% year-over-year in the second quarter, contributing to a decline in Tesla's gross margins from 27% to 18%. 

For the third quarter, analysts are looking for a gross margin of roughly 15.8% on sales of $6.44 billion. Analysts expect a 42 cent loss per share. 

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