With the stock price falling and profits shrinking, $Tesla (TSLA.US)$ it is becoming increasingly out of place among the giant technology companies. Investors worry that the upcoming quarterly performance may further isolate this electric auto manufacturer.

Tesla is the only one of the so-called 'Big Seven' companies expected to see a decline in latest quarterly profits, and the only one on Wall Street expected to have a year-on-year profit decrease. Tesla's stock has fallen by 12% this year, while other tech giants' stocks have been on the rise. Despite this, Tesla remains the most highly valued by profit within this group of companies, making it face challenging performance expectations.

As of the time of publication, tesla fell more than 1%.

Wednesday's post-market trading earnings report may not receive much attention - if earlier this month, Tesla could impress investors with its demonstration of self-driving cars. However, the launch of Robotaxi did not meet market expectations, putting more pressure on the company's traditional core business - electric vehicle sales. David Wagner, portfolio manager at Aptus Capital Advisors, stated:

"Investors are starting to lose patience with Tesla, especially in the situation where the ideas presented at the Robotaxi launch event were plentiful but execution was poor, while the growth expectations for its core business remain sluggish over the next two years."

Reports indicate that Tesla's Robotaxi failure has made its high valuation appear more unstable. Wall Street will closely watch whether the slowdown in electric vehicle sales is nearing its bottom, and keep an eye on Tesla's profit margins which have been under pressure over the past year. Investors are also eager to hear news about more affordable electric vehicle models.

The expected financial report data may boost some confidence in the short term, but analysts warn that without more explicit information about long-term growth, it will be difficult for the stock price to see a significant increase.

"Regardless of how the third-quarter performance turns out, we believe that without a reason for investors to raise their expectations, there may not be a sustained call for a re-rating," wrote Alexander Potter, an analyst at Piper Sandler, in a report. Potter expects these reasons to emerge next year, including the release of new products and advancements in the regulatory approval of the company's advanced driving assistance software in new regions like China.

Analysts generally expect Tesla to have an earnings per share (EPS) of $0.60 for the three months ending September 30, a 10% decrease from the same period last year; revenue is expected to be around $25.4 billion, an 8.9% year-on-year increase. Expectations for the third quarter are significantly lower compared to last year, when analysts predicted an EPS of $1.09. At the same time, the key indicator that traders are most concerned about - auto gross margin excluding regulatory credits is expected to be 14.9%, slightly higher than the 14.6% in the second quarter.

"In the short term, the most important factors for stock price are whether the demand trend meets expectations and whether the gross margin exceeds or falls below expectations," said Cole Wilcox, portfolio manager at Longboard Asset Management. Despite Tesla's strong position in the electric vehicle market compared to competitors, "electric vehicle demand is no longer the explosive high-growth category it once was," Wilcox pointed out.

Since the end of 2023, Tesla has been hampered by slowing demand for electric vehicles, as consumers have delayed the purchase of big-ticket items due to high inflation, soaring borrowing costs, and concerns about economic slowdown. Tesla has been lowering prices aggressively to attract buyers and fend off emerging competitors. While this has helped the company win some customers, it has not fully offset the impact of weak demand, resulting in declining revenue and profits.

The downward revision of profit expectations has made Tesla's stock valuation appear even more expensive. Based on future earnings, Tesla's PE ratio is 74 times, the highest among giants, surpassing Amazon, Microsoft, Apple, Google parent Alphabet, Meta, and Nvidia.

Nevertheless, investors state that Tesla's position among the 'big seven' giants remains effective, considering its innovation capabilities and potential to lead the automotive industry as autonomous driving cars become commonplace in the future. "The upcoming Tesla earnings report is crucial, but it is just a part of the bigger picture," said Adam Sarhan, founder and CEO of 50 Park Investments.

"It's premature to exclude Tesla from the 'big seven' at the moment, but the company does face enormous pressure to prove its worth."

Editor/Somer