Tesla (TSLA) is expected to report results on its fiscal third quarter on Wednesday, October 19, with a conference call scheduled for 5:30 pm EDT. What to watch for:

BALANCED SETUP: Ahead of quarterly results, Citi analyst Itay Michaeli reduced 2022 and 2023 estimates for Tesla while maintaining out-year estimates. The analyst's third quarter earnings estimate is slightly above consensus on a modestly higher quarter-over-quarter incremental gross margin but he thinks the main focus will be on Tesla's fourth quarter outlook for deliveries and gross margins. The setup for the stock "seems balanced if not slightly positive," Michaeli told investors in a research note. If Q3 beats and management delivers "some reassurance" on Q4 and 2023, the stock "likely bounces post the recent pullback," the analyst wrote. However, Michaeli is not sure the third quarter update alone can fully address macro concerns into the fourth quarter and 2023, and thinks the stock "might quickly revert to trading on macro/industry datapoints." The analyst kept a Sell rating on the shares with a price target of $141.33.

TARGET CUT AHEAD OF RESULTS: On Friday, Wells Fargo analyst Colin Langan lowered the firm's price target on Tesla to $230 from $280 to reflect higher weighted average cost of capital, while keeping an Equal Weight rating on the shares ahead of the company’s third quarter results. The analyst forecasts a "slight" beat, saying the benefit of pricing will likely be offset by currency headwinds. Tesla is also the biggest beneficiary of the Inflation Reduction Act, noted Langan, who increased his 2023 through 2026 earnings estimates by 33% to reflect the bill's benefits. There should be a $3,100 per vehicle benefit from production tax credits for any U.S.-made battery, which alone drives $2.8B in savings if Tesla maxes its 900,000 U.S. footprint, he added.

Early last week, Morgan Stanley analyst Adam Jonas also lowered the firm's price target on Tesla to $350 from $383 but kept an Overweight rating on the shares, telling investors that he believes the factors that drove Tesla's weaker than expected production and deliveries in the third quarter "could continue to present headwinds" into the fourth quarter and fiscal 2023. Following the delivery and production announcement the week prior from Tesla, Jonas lowered his full year 2022 delivery forecast to 1.31M units from 1.37M units and cut his 2023 delivery forecast to 1.8M from 2M previously.

On October 2, the company had reported Q3 deliveries of 343,830, with 3% subject to operating lease accounting, and production of 365,923 vehicles. Tesla also said it delivered 18,672 Model S/X and 325,158 Model 3/Y.

MORE POSITIVE ON TESLA: On Thursday, Evercore ISI analyst Chris McNally raised the firm's price target on Tesla to $300 from $267 and kept an In Line rating on the shares. The analyst told investors he now leans "much more positive" on Tesla following the Manchin/IRA bill, calling the company "the clear near-term winner of the bill," followed by General Motors (GM) second and "everyone else a far third." However, he is also concern that "some of the most optimistic numbers of their expected benefit have gotten WAY out of control."

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