On May 25, as per J.P. Morgan data, Nvidia Corp (NVDA.O) was poised to disrupt Tesla Inc’s (TSLA.O) continuous reign as the most traded stock by retail traders, a trend that persisted since November 4. Nvidia’s stock surged by 27%, nearing a remarkable $1 trillion market value. This significant increase followed the U.S. chip designer’s projection of quarterly revenue, which exceeded estimates by more than 50%. This development signals that Wall Street may have underestimated Nvidia’s pivotal role in driving the artificial intelligence (AI) revolution.

Nvidia continued to dominate trading activity, emerging as the most actively traded stock on Fidelity’s platform and claiming the top trending spot on the investor-focused social media site stocktwits.com. In 2023, retail investors have shown notable interest in Nvidia, ranking it as the most purchased stock after Tesla, Amazon.com Inc (AMZN.O), and Apple Inc (AAPL.O) individually, as reported by Vanda Research. This data suggests a sustained and growing appeal of Nvidia among retail investors. Reported by Medha Singh in Bengaluru; Edited by Shounak Dasgupta and Devika Syamnath.

Cybertruck Smokescreen? Analysts Ring Warning Bells On Tesla Margins

As Tesla (TSLA) gears up for its second-quarter earnings this week, the spotlight has shifted to the highly anticipated Cybertruck, which took center stage in the news cycle following the recent report of the first vehicle rolling off the production line at the company’s Austin plant. Concurrently, analysts are sounding cautionary notes on the company’s margins.

In a strategic move just days before the earnings release, Tesla shared an image of the inaugural Tesla Cybertruck produced at its factory. Elon Musk, the Chief Executive, acknowledged the achievement with a congratulatory message to the Tesla Team. This development resonated in the market on Monday, with Tesla stock responding by surging 3.2% to reach 290.38 during market trade.

In a recent daily trade disclosure, ARK Investment Management, led by Cathie Wood, offloaded 45,184 shares of Tesla on Monday, amounting to approximately $13.12 million based on the closing price of TSLA.

As the spotlight shifts to the eagerly anticipated Cybertruck, there are pertinent uncertainties and inquiries looming ahead of the Q2 earnings report. One key consideration is the resilience of Tesla’s margins following the company’s assertive price reductions. Looking forward to Q3, the potential risk of overproduction emerges as a significant concern. Furthermore, the announcement made on Saturday intensifies the pressure on Tesla, with investors seeking a clear timeline for the commencement of mass production and deliveries for the long-awaited Cybertruck, which has faced persistent delays.

Analysts Cautious Going Into Earnings

Wells Fargo analyst Colin Langan adjusted the firm’s price target for Tesla stock to 265, a notable increase from the previous 170, while maintaining an equal-weight rating.

In his analysis on Monday, Langan acknowledged Tesla’s surpassing of Q2 delivery volume estimates. However, he expressed caution regarding the potential impact of price reductions on Tesla’s Q2 auto margins. Another area of concern highlighted by Langan is the possibility of production volumes outpacing demand as the second half of 2023 approaches.

Despite Tesla’s outperformance in Q2 delivery volumes, Wells Fargo’s projection suggests a decline in the company’s gross margin on autos to 17.5%. This anticipation is attributed to ongoing price cuts and a potentially weaker product mix, as outlined in Langan’s Monday report.

“Margins, margins, margins,” emphasized Wedbush analyst Daniel Ives, a longstanding supporter of Tesla, in his commentary on Monday.

Ives anticipates that Tesla is poised to exceed Wall Street’s Q2 estimates, but the primary focal point remains on auto gross margins. The scrutiny revolves around assessing the impact of recent price cuts and understanding the implications for future margins.

In alignment with this perspective, Ives projects auto gross margins to hover around 17.5%. However, he remains optimistic, suggesting that gross margins are likely to rebound in the upcoming quarters, aiming towards the 20% mark as we approach 2024.

This comes on the heels of Citigroup’s upward adjustment of its Tesla stock price target from 215 to 278 last week. Analyst Itay Michaeli, maintaining a neutral rating on TSLA, perceives a “neutral-to-slightly negative” positioning for Tesla in anticipation of the Q2 report. Michaeli remains apprehensive about the potential impact of price cuts on margins.

Adding to the chorus of margin concerns, Morgan Stanley analyst Jonas underscored the significance of margins in Tesla’s upcoming performance. Jonas reported a range of estimates for Tesla’s Q2 gross margins, varying from as low as 16% to as high as 20%. While acknowledging Tesla’s prowess in AI, Jonas remains cautiously optimistic about the outlook for earnings revisions.\

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