Barclays has reaffirmed its "neutral" rating for Tesla (TSLA, Financial) stock, maintaining the target price at $220. Following the Robotaxi event, Barclays analysts noted that Tesla's focus has returned to its fundamentals, with investors concentrating on the company's sales outlook and path to margin recovery.
Analysts, led by Dan Levy, indicated that Tesla's upcoming third-quarter results could act as a positive catalyst, as they anticipate outcomes surpassing expectations. While Tesla's performance report is slated for release next week, Barclays predicts an adjusted earnings per share (EPS) of $0.68, exceeding the FactSet survey's average estimate of $0.60.
Barclays attributes Tesla's potential for positive performance to expected improvements in profit margins, reduced operating costs, and stable regulatory credit income. They note that Tesla's earnings expectations have largely stabilized after significant downward revisions.
In the third quarter, Tesla's automotive gross margin is projected to exceed expectations at 15.2%. Sales are anticipated to equal those of the previous year, marking an improvement from earlier downward trends. Profit margins are believed to have bottomed out and are expected to improve. Regulatory credits could emerge as a strong driver for Tesla, as other automakers rely on the company to meet emission standards. Furthermore, Tesla's energy business continues to grow robustly, while recent layoffs have contributed to cost savings, potentially reducing current expenses.
Barclays remains optimistic that these factors, coupled with potential highlights, may enable Tesla stock to outperform post-third-quarter results, especially after the recent sell-off following the Robotaxi event.
