Should You Buy Tesla Stock Before July 22?
Key Points
Tesla recently published Q2 delivery figures, massively beating Wall Street's estimates.
Despite the encouraging turnaround, Tesla stock plummeted after the report.
Tesla's valuation profile suggests a lot of optimism is already priced into the stock.
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Tesla (NASDAQ: TSLA) is scheduled to report second-quarter earnings after market close on July 22. As usual, Tesla's earnings arrive against a backdrop of already reported vehicle deliveries.
Since the company has moved past its usual quarterly delivery update, the market now has time to digest some cursory business trends before the full financial picture emerges. This invites a closer look at what really matters for Tesla's operating results and whether the stock's recent behavior offers clues for what might happen next.
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What is Wall Street expecting for Tesla's upcoming earnings report?
Current consensus estimates forecast Tesla's revenue at around $25.4 billion and EPS at $0.48 for the second quarter. Beyond revenue and earnings, investors will surely scrutinize Tesla's automotive gross margins for signs of pricing pressure or cost discipline, the pace of expansion in the energy storage business, and any incremental discussion of free cash flow and capital expenditures.
Commentary on progress around Full Self-Driving (FSD) or future product timelines for the robotaxi and Optimus will likely surface as well. However, the immediate reaction to Tesla stock post-earnings tends to hinge on whether the company beats or misses the revenue and profit expectations already set.
Did Tesla beat Q2 delivery expectations?
On July 2, Tesla published that it delivered roughly 480,000 vehicles during the second quarter, comfortably ahead of the 406,000 units analysts had modeled and up about 25% from the same period last year.
The beat ends a stretch of softer-than-expected volume comparisons and may finally point to improving demand. Because vehicle deliveries translate directly into automotive revenue, the strong performance increases the likelihood that Tesla's top line will exceed expectations. At the same time, smart investors understand that volume surges can leave open questions about average selling prices and any product mix shifts that could influence profitability.
Is Tesla stock a buy before earnings?
When Tesla reported deliveries on July 2, shares actually fell sharply by as much as 7%, marking one of the stock's weakest days in nearly a year. Even though Tesla's results were impressive, the decline occurred because much of the positive momentum had already been reflected in the price during the preceding weeks.
Markets have a tendency to price in optimistic scenarios before an event actually occurs. Traders took profits once the good news was actually confirmed.
I think a comparable dynamic could easily play out after the full earnings release. A clean beat on revenue and EPS might produce a muted or even negative reaction if management's guidance falls short of delivering fresh, measurable catalysts. This is why timing the market around any single quarterly report is a fool's errand.
Tesla appeals to investors who see value in the eventual scaling of robotaxis and humanoid robots. However, neither of these initiatives contributes meaningfully to Tesla's business today.
TSLA PE Ratio data by YCharts
For most investors, Tesla functions primarily as an expensive momentum stock whose current valuation rests more on hype than on tangible near-term financial payoffs from the company's moonshot bets. The company's upcoming earnings report is unlikely to resolve these broader tensions one way or the other.
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Adam Spatacco has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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