Tesla releases quarterly earnings tomorrow: is Tesla stock a buy or a sell?

Tomorrow is a big day for Tesla (NASDAQ:TSLA) investors – the company will announce its Q2 2023 earnings after the market close on July 19, 2023.

It is no small deal for Tesla fans, as the stock is up +168.62% YTD. So is this a time to sell or to buy Tesla shares, considering the rally in the first six months of the year?

Tesla has unrivaled profit margins

Tesla has cut prices by as much as 20% at the start of the year. It was a surprise move to many, but it made sense, considering that Tesla had unrivaled profit margins up to that point.

For example, the gross profit per car in Q3 2022 was $15,653, and the net profit was $9,574. In comparison, GM was in second place with a $3,818 gross profit per car and a $2,150 net profit.

The idea here is that Tesla did make a good choice by slashing prices. First, it had a terrific profit margin, so it had room to cut. Second, it had put pressure on competitors as suddenly a Tesla was more affordable.

Selling more at a lower price is in line with the law of demand. Tesla played and still plays that card.

Will Cybertruck production change anything?

According to a Wall Street Journal article published this week, Tesla began Cybertruck production. Sure enough, it is no coincidence that the news comes out exactly on the week when the quarterly results will be made public, and some questions do not have an answer.

For instance, there is no price or specifications for the Cybertruck. Also – was it fully tested? Did it pass all applicable crash tests?

Such questions should have been answered before production starts, so it would be interesting to see if investors may find out more about this on Wednesday’s earnings release in the questions and answers session.

Tesla’s stock price made a bullish breakout

Investors buying Tesla stock in 2023 have done really well so far. Effectively, the stock price moved higher, eventually breaking above the descending trendline drawn from the 2021 highs.

Moreover, the bullish breakout follows an inverse head and shoulders pattern – a bullish reversal pattern. Hence, the technical picture favors more upside, and a move above $400 should not be underestimated, especially if Tesla’s earnings beat expectations.

Most analysts are bullish on Tesla stock

Out of the 92 analysts following Tesla, 57 have buy ratings, 30 sell ratings, and 5 are bearish.

Most recently, Morgan Stanley maintained its hold rating with a price target of $250. So did Wells Fargo & Co, but with a higher price target of $265.