Tesla reports 2nd quarter earnings Wednesday amid a searing stock rally. Here's what 4 Wall Street analysts are talking about ahead of the report.

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  • Tesla reports its highly anticipated second-quarter earnings on Wednesday after market close.
  • The report comes after the automaker’s second-quarter vehicle delivery numbers beat Wall Street expectations.
  • Investors and analysts will be closely watching to see if Tesla is able to pull off a profit this quarter. If it does, it will have fulfilled the last criterion for inclusion in the S&P 500 Index.
  • Here’s what four analysts said ahead of Tesla’s earnings.
  • Watch Tesla trade live on Markets Insider.
  • Read more on Business Insider.

Tesla will report its second-quarter 2020 earnings on Wednesday following the closing bell in New York, and all eyes are watching the company’s ability to turn a profit amid the coronavirus pandemic.

If Tesla does indeed report its fourth consecutive quarterly profit on Wednesday, it will have fulfilled all criteria for possible inclusion in the popular S&P 500 index.

Here are the key numbers analysts surveyed by Bloomberg expect:

  • Adjusted earnings per share: -14 cents, expected
  • Revenue: $US5.19 billion, expected

If Tesla falls short of the profit goal, its epic stock rally that’s made it the most valuable automaker in the world this year could be in danger. Shares of the automaker have surged as much as 292% this year through Monday’s close, following better-than-expected second-quarter vehicle delivery numbers that came even as the coronavirus pandemic forced its Fremont, California, factory to close for most of the quarter.

Since, shares have continued to climb to fresh highs amid a slew of Wall Street upgrades, the announcement of its upcoming Battery Day event, and S&P 500 inclusion optimism. In addition, bearish bets against Tesla also hit a record – Tesla was slated to become the first company with a $US20 billion short bet against it.

Here’s what four analysts are saying about Tesla ahead of its earnings release.

1. Wedbush: Tesla has “executed flawlessly this quarter”

Price target: $US1,250

Rating: Neutral

“While Street numbers are all over the map and looking for red ink this quarter, we are modelling profitability with the 90k delivery number and continued GM efficiency/cost cutting getting Musk & Co. away from the red ink,” wrote Daniel Ives of Wedbush in a Monday note.

Even though Tesla faced a “dark macro backdrop and COVID storm clouds,” it has “executed flawlessly this quarter posting 90k deliveries and crushing Street expectations in Aaron Judge-like home run fashion,” Ives said. Investors will be focusing on its second quarter profitability, China delivery trajectory, Model 3 demand outlook, and any hints around the Battery Day announcements.

“In a nutshell the success in China out of the gates is a major achievement for Tesla and if this trajectory continues will be a ‘game changer’ for its EV penetration story over the next decade.”

2. JMP Securities: “Any intermediate-term success that TSLA might discuss during its earnings call tomorrow is now fairly reflected in the stock price”

Price target: $US1,500

Rating: Market perform

“We believe that any intermediate-term success that TSLA might discuss during its earnings call tomorrow is now fairly reflected in the stock price,” Joe Osha of JMP Securities wrote in a Tuesday note downgrading Tesla to market perform.

Osha wrote that he expects Tesla “should show progress on several fronts” when it reports earnings Wednesday including in higher gross margins. JMP also expects Tesla to deliver roughly 435,000 units for the year, and its Shanghai factory to provide additional capacity to meet any demand.

“All of this progress makes the investment decision challenging,” Osha wrote. “We continue to believe that TSLA builds the best battery electric vehicles in the market, and other than Volkswagen it is not even clear to us who can offer viable competition.”

Still, he added “The stock has now gotten to our target level, however, and we think that investors face challenges in earning additional returns from here.”

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3. Deutsche Bank: “Tesla stock has seemingly been making new all-time highs every day”

Price target: $US1,000

Rating: Hold

Deutsche Bank raised its Tesla price target to $US1,000 following the company’s better-than-expected second quarter delivery numbers.

“Tesla stock has seemingly been making new all-time highs every day, supported by leaks of the strong 2Q and potential inclusion into the S&P 500 and more broadly by very positive investor sentiment toward electrification which is likely pulling in large ESG driven fund flows that have limited options in public markets,” wrote Emmanuel Rosner in a July 6 note.

Factoring better volumes, Rosner boosted his second quarter revenue forecast to $US5.84 billion from $US4.97 billion, “suggesting Tesla could potentially achieve GAAP profitability in the quarter which would fulfil the last criteria for inclusion into the S&P 500,” he said.

4. CFRA: “Shares have gotten ahead of underlying fundamentals”

Price target:$US1,100

Rating: Sell

“We think TSLA shares have gotten ahead of underlying fundamentals and do not appropriately reflect various risks surrounding the story, including the fact TSLA is entering a major spending cycle with the construction of Gigafactories 4 and 5, which we expect to act as a significant drag on free cash flow over the next several quarters,” Garrett Nelson of CFRA wrote in a Friday note.

“Furthermore, we view the Model Y price reduction as a red flag and see the potential for an equity offering given the stock’s meteoric run-up, noting that TSLA issued equity in February at $US767/sh, roughly half its current price,” he added.

“Finally, we think shares have benefited from short covering (current short interest of 7.5% is down from 23.2% a year ago) and speculation that it will post a Q2 GAAP profit next week and be eligible for S&P 500 inclusion (prompting index fund buying), but this is far from guaranteed.”

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