Source: Finance Association

Next Tuesday (23rd) EST, it has recently been heavily attacked$Tesla (TSLA.US)$The latest performance report will be released and what is probably the “most widely anticipated conference call in history” will be held. However, the internationally renowned investment bank Barclays (Barclays) anticipates that there will be no good news at this conference.

In its latest report released on Wednesday, Barclays cut Tesla's target share price by 20% from $225 to $180 and maintained its “neutral” rating. The bank believes that Tesla's upcoming first-quarter earnings report will be a negative catalyst for the stock.

Tesla closed at $155.45 on Wednesday, down 1.06%. The stock's cumulative decline so far this year has reached 38%.

Just two weeks before Barclays made this prediction, Tesla released Q1 delivery data, which greatly disappointed Wall Street. Tesla blamed this on supply delays, including a fire at the Berlin factory and a drop in production of the new Model 3 at the Fremont factory, but Wall Street believes that the decline in market demand for its products is the main reason.

A week ago, a media report mentioned that Tesla had abandoned plans to produce low-cost electric vehicles. Sources said that the decision to abandon the Model 2 was announced at an internal company meeting held at the end of February this year, and the company switched its focus to developing the autonomous taxi Robotaxi.

In response, Musk quickly denied the truth of the report and accused the media that published the news of “lying.” However, it was also acknowledged on social media that Tesla will release Robotaxi on August 8. On Monday, Tesla also issued an employee letter, planning to fire 10% of its employees globally, and two key executives will also leave their jobs.

Future strategy is the focus of performance

Barclays analyst Dan Levy said he expects Tesla's results next week to fall short of Wall Street's expectations, and its gross margin may disappoint investors. CEO Musk's recent decision to fully invest in the autonomous taxi fleet is unlikely to be warmly welcomed.

“The Model 2 plan is likely to get the most attention, but don't expect satisfactory answers,” he said.

Levy pointed out that although Tesla's focus should be on its ability to increase vehicle deliveries and increase profit margins in the increasingly competitive electric vehicle market, this probably won't be the focus of the earnings call.

“Tesla's recent fundamentals have been seriously challenged, but these issues will give way to bigger issues as Tesla is facing a turning point in its investment thinking. Specifically, the central focus of this call will be to understand Tesla's future strategy, as Tesla appears to be abandoning plans to produce mass-market models (Model 2) and instead focusing on autonomous driving.” he wrote.

Levy said that if Tesla actually switched from mass-market cars to fully automated robot taxis, it would “have a clear negative impact on Tesla's investment ideas.” He said, “This has brought huge uncertainty about Tesla's future path.”

Three negative factors

Speaking about Tesla's earnings call next week, Levy highlighted three negative catalysts he expected to hear.

1. The gross margin for the first quarter is expected to fall short of market expectations. Furthermore, we don't expect Tesla to make any comments to ease investor sentiment, as fundamentals remain weak recently.

2. “Free cash flow is likely to be negative. This is the first time since the first quarter of 2020 that there has been negative cash flow. There may be some shocking elements to this result.”

3. “While investors will come to the conference call with major questions about Tesla's strategy, we believe many of these questions may go unanswered. Since there is still a lot of uncertainty about investment opinions, this may cause investors to choose to quit.”

editor/tolk