Charged: Analyst forecasts earnings beat for Tesla ahead of results

Apple reportedly worked with BYD to develop long-range EV battery

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

TESLA TO REPORT EARNINGS: 

Barclays forecasts a Q3 beat for Tesla, with earnings per share of 68c versus the consensus estimate of 60c. It expects Tesla to post upside driven by margin improvement, cost reductions, and potentially also from solid regulatory credit revenue. However, Barclays still believes the company’s outlook is “somewhat more uncertain.” With Tesla’s robotaxi day passed, the focus, at least for now, shifts back to fundamentals, the firm tells investors in a research note. Barclays believes there are outstanding questions on the volume outlook and path to margin recovery, and also questions the path to unlocking value from Tesla’s emphasis on autonomous vehicle-driven growth. However, given expectations of a Q3 beat and reminder of stabilized near-term estimates, it thinks the Q3 results “could be a positive near-term catalyst.” The firm keeps an Equal Weight rating on Tesla.

TESLA FSD: 

While Tesla has announced last month on social media that it expected to launch its full self-driving or FSD in China in the first quarter of 2025, the company has yet to receive regulatory approval from authorities to launch FSD functions in the country, China Daily’s Cheng Yu reports, citing people familiar with the matter. The proposal is still pending from various Chinese authorities to evaluate the technology, data safety, laws and regulation, even though the Chinese government will partially support its trial test of FSD functions in some cities, the report states.

Meanwhile, the NHTSA has opened a defect investigation into Tesla’s Full Self-Driving system following reports of four crashes, one of which resulted in a fatality. Failure of the system engineering controls to react appropriately to reduced roadway visibility conditions, the NHTSA said. NHTSA is estimating 2.4 million vehicles are subject to the investigation. The products involved are Model S, Model X, Model 3, Model Y and Cybertruck.

Click here to check out Tesla’s recent Media Buzz Sentiment as measured by TipRanks.

POSITIVE CATALYST WATCH: 

JPMorgan placed shares of XPeng (XPEV) on “Positive Catalyst Watch,” while keeping an Overweight rating on the name. The firm sees two important near-term events, namely the October 24 XPeng technology day where it anticipates various new initiatives and the late November Q3 results announcement where it expects a beat. XPeng’s upcoming new product strategy, advancing inhouse technology and solid Q3 earnings as well as strength in Q4 vehicle delivery should altogether support its share price, JPMogan tells investors in a research note.

JPMorgan also added a “Positive Catalyst Watch” on shares of First Solar (FSLR) heading into the U.S. election. The firm keeps an Overweight rating on the shares. Election uncertainty skews Q3 clean energy stock reactions negative, though presents possible upside in November, JPMorgan tells investors in a research note. The firm would expect “largely status quo fundamental impact” for the space in any scenario other than a Republican sweep, meaning that the space could be set for a broad-based relief rally post-election. Even in a Republican sweep, the reality of potential outcomes could be more nuanced than general expectations, presenting potential buying opportunities after a likely knee-jerk negative reaction given Trump’s support of base tax credits during his first administration, contends JPMorgan.

LONG-RANGE EV BATTERY: 

Apple (AAPL) worked with BYD (BYDDF) for years as part of its now-canceled car project, developing long-range batteries which helped lay the groundwork for the technology used today, Gabrielle Coppola and Mark Gurman of Bloomberg reports, citing people familiar with the situation. Apple and BYD teamed up around 2017 to build a battery system using lithium iron phosphate cells, the sources added. While Apple does not own any of the technology used in BYD’s current batteries, the partnership shows how far the company went in its efforts to produce a car.

WORST IS BEHIND: 

Guggenheim upgraded Enphase Energy (ENPH) to Neutral from Sell without a price target. The firm cites valuation for the upgrade with the shares approaching its prior price target. Enphase continues to face challenges, but the stock now appears fairly valued, Guggenheim tells investors in a research note. The firm believes Enphase still faces a tough 2025 and that consensus estimates are too high for next year. However, the worst of the company’s challenges are now behind it, Guggenheim contends. The company’s relatively high U.S. market exposure is “good news at the moment,” given the damage the Chinese suppliers are doing to pricing in Europe, which is more a problem to competitor SolarEdge (SEDG) than Enphase, says the firm.

MARKET SHARE CONCERNS: 

Meanwhile, Susquehanna downgraded Enphase Energy to Neutral from Positive. The firm cites the slower than expected recovery in U.S. residential solar and market share concerns, coupled with the stock’s premium valuation, for the downgrade. Powerwall 3 is seeing strong demand in the storage space, which will take some share from Enphase given Powerwall’s integrated battery/inverter product, Susquehanna tells investors in a research note. Given that California is moving to a largely battery-attached market, the firm expects a larger percentage of solar installs to use these hybrid battery/inverter offerings. Its concern is that the increasing competitive landscape could make it difficult for Enphase to maintain its superior market share.

RBC Capital also downgraded Enphase Energy to Sector Perform from Outperform. The firm says competitive market dynamics will result in a slower pace of growth next year, which is not reflected in current consensus estimates. It models 2025 revenue of $1.825B for Enphase, 8% below consensus, and 2026 revenue of $2.05B, 13% below consensus. The high-interest rate environment and ability of third-party ownership systems to access higher Inflation Reduction Act tax credits to support continued adoption could be an increasing headwind to demand growth next year, RBC tells investors in a research note.

EUROPE, CASH CONCERNS: 

Guggenheim downgraded SolarEdge to Sell from Neutral. The company seems to have “no answer” for the continued aggressiveness of Chinese suppliers in European markets for residential inverters, the firm tells investors in a research note. Guggenheim believes a “fundamental reassessment” of SolarEdge’s product lineup in Europe is needed. Investors may be underestimating how quickly the attach rate in the market could rise next year as prices continue to decline and the remaining California NEM 2.0 backlog, which has much lower storage attach rates, is worked off, contends the firm. Guggenheim also believes SolarEdge will need to raise capital before September 2025.

TD Cowen also downgraded SolarEdge but to Hold from Buy. The firm cites deteriorating demand in Europe for the downgrade. This will delay a volume, margin recovery and timeline on SolarEdge achieving $550M in quarterly revenue as well as positive free cash flow, TD Cowen tells investors in a research note. The firm says the potential for an additional capital raise and interim CEO uncertainty remains.

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Originally Posted October 21, 2024 – Charged: Analyst forecasts earnings beat for Tesla ahead of results