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Earnings: 2 Hot Stocks to Watch Wednesday

By Daniel Sparks - Oct 31, 2017 at 4:16PM

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Two fast-growing companies will be put to the test this week. Can they keep shareholders bullish on their growth potential?

If three big stock moves from some of the biggest names in tech weren't enough excitement last week, earnings season is bound to include some interesting surprises this week. Electric-car maker Tesla (TSLA 1.24%) and social network Facebook (META -0.76%) are both scheduled to report their third-quarter results on Wednesday.

Between Tesla's Model 3 production ramp-up and Facebook's impressive revenue growth, there will be plenty for investors to mull over when these two companies report their results. Ahead of their earnings releases, here's a look at each company, as well as one key metric to watch for both.

Model 3 interior and its 17-inch center touch display

The Model 3. Image source: Tesla.


For Tesla, analysts are expecting revenue of $2.94 billion and a non-GAAP (generally accepted accounting principles) loss per share of $2.27. This compares to revenue of $2.3 billion and a non-GAAP loss per share of $0.71 in the year-ago quarter.

The consensus forecast for a widening loss per share is in line with the commentary that management provided on what to expect from its third quarter, as Model 3 production just started to get underway. Subsequently, management forecast its non-GAAP automotive gross profit margin to be below 20% during the quarter -- much lower than its comparable margin in the year-ago quarter of 25.1%.

Key metric to watch: Guidance for 2018 vehicle production

Up until now, Tesla has provided an ambitious forecast for building 500,000 vehicles next year with the help of its new Model 3. But since Model 3 production is lagging behind, investors should look to see if management lowers its outlook for next year.

Facebook CEO Mark Zuckerberg presents 10-year plan at F8 conference in 2016

Facebook CEO Mark Zuckerberg. Image source: Facebook.


As usual, analysts have enormous expectations for Facebook's quarterly revenue growth. On average, analysts expect the social network to report third-quarter revenue of $9.8 billion, up 40.3% year over year. While this would mark a deceleration compared to Facebook's year-over-year jump in second-quarter revenue of 45%, it's still a bullish forecast, considering the company has warned it expects revenue growth to come down meaningfully in the second half of the year.

Key metric to watch: Earnings per share

With Facebook's revenue growth expected to come down, the social network may not be able to leverage its operational profitability as easily. This is likely one of the reasons analysts are expecting the company's EPS to increase only 17% year over year to $1.27, compared to year-over-year growth in EPS of 69% in Facebook's second quarter.

For more on what to expect from Tesla and Facebook's earnings reports, check out these more in-depth earnings previews on each: a look at Tesla's cash burn and its rising Model X sales; and Facebook's revenue drivers and its plans for users to join "meaningful groups."

Both Tesla and Facebook report their earnings after market close on Wednesday.

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Stocks Mentioned

Meta Platforms, Inc. Stock Quote
Meta Platforms, Inc.
$160.03 (-0.76%) $-1.22
Tesla, Inc. Stock Quote
Tesla, Inc.
$681.79 (1.24%) $8.37

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