Tesla (TSLA) is expected to report results on its fiscal second quarter on Wednesday, July 20, with a conference call scheduled for 5:30 pm EDT. What to watch for:

COMPELLING OPPORTUNITY: Deutsche Bank analyst Emmanuel Rosner has placed a "Catalyst Call: Buy" on shares of Tesla as a short-term investment idea ahead of the company's second quarter results on July 20. Tesla could report potential upside to "low" Street expectations for margins, driven by good cost execution and continued pricing strength, Rosner told investors in a research note. The analyst expects management to reiterate its full year deliveries growth of 50%, suggesting total volume of approximately 1.4M units and implying "considerable volume ramp" in the second half of the year.

The Street's anticipated sequential profit deterioration of greater than $1.5B "more than captures the large headwinds faced in the quarter," from COVID-related shutdowns in China, costs associated with closed-loop productions, and ramps in Texas and Berlin factories, Rosner said. He thinks Tesla's 30% year-to-date pullback largely reflects supply issues "that are fast improving." The selloff provides a "compelling opportunity to accumulate the stock" into the second half and 2023 where Tesla's volume growth and margin expansion "could be meaningful," Rosner contended. The analyst has a Buy rating on the stock with a $1,125 price target.

‘MODEST’ Q2 EARNINGS BEAT: Barclays analyst Brian Johnson raised the firm's price target on Tesla to $380 from $370, while keeping an Underweight rating on the shares ahead of the company's second quarter results on Wednesday. The analyst expects a "modest" Q2 earnings beat verses consensus but sees a greater focus on free cash flow given CEO Elon Musk's comments last month that Berlin and Austin are "gigantic money furnaces right now." He's maintaining third quarter estimates despite reports of Shanghai and Berlin factory shutdowns and expects a bitcoin impairment of $460M.

‘SERIOUS LEGAL JEOPARDY’: In a research note last week after Twitter (TWTR) filed a lawsuit in the Delaware Court of Chancery against Elon Musk for terminating his deal to acquire the social media giant, GLJ Research analyst Gordon Johnson, who has a Sell rating on Tesla and $67 price target, said he believes Twitter has Elon Musk "dead to rights" in relation to its lawsuit over the terminated buyout agreement. After speaking with a number of legal experts, the analyst believes many investors are underestimating the "serious legal jeopardy" Musk faces. Johnson noted that Tesla lost $124.8B in market capitalization on Musk's offloading of just $8.517B in share. Given Twitter lawyer Wachtell's contention in a recent filing, Musk remains personally responsible for $33.5B of the approximately $44B required to complete the transaction, he added.

The potential liability to Tesla shareholders "is, indeed, scary." Assuming Musk funds his $33.5B obligation with the sale of Tesla shares, the company's market cap could fall by $491B to $225.41 per share, or 68% downside from July’s 12 closing price, the analyst pointed out at the time. Existing Tesla shareholders "may be grossly underestimating the 'baggie' risk they are exposed to. Caveat emptor," Johnson wrote.

FY22 GOAL ‘POTENTIALLY A STRETCH’: Earlier this month, Tesla reported second quarter deliveries of 254,695, with 4% subject to operating lease accounting, and production of 258,580 vehicles. Following the news, Bernstein analyst Toni Sacconaghi noted that Tesla’s reported second quarter deliveries of 255,000 were down from 310,000 in the first quarter and below muted consensus expectations of 261,000. The analyst believed that the shortfall in deliveries was attributable to a slower than expected re-ramp of the Shanghai facility, particularly in May.

Furthermore, Sacconaghi told investors that Tesla's full year 2022 goal of 1.5M deliveries or 60% growth is "potentially a stretch," but 50% growth or 1.4M units "appears plausible," with expanding production in China and incremental contribution from Berlin and Austin. The key question for the quarter is profitability, the analyst argued. While recent comments from Musk that Austin and Berlin are "gigantic money furnaces right now" losing "billions of dollars" are likely, Sacconaghi believed that they signal some potential profitability pressure amid slow ramps and rising input costs. He has an Underperform rating and a price target of $450 on the shares.

More By This Author:

What Wall Street Is Saying About Netflix Ahead Of Earnings Report
Here is What Wall Street Is Saying About IBM Ahead Of Earnings
Opening Day: AMTD Digital Soars In Trading Debut