Tesla shares fall ahead of earnings results, all eyes on Model 3

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Tesla [Nasdaq: TSLA] shares fell 3% in Wednesday morning trading, shedding nearly all of its gains from the day prior when Panasonic’s CEO said that battery production at the Tesla-Panasonic Gigafactory plant will soon be automated.

“This process (for battery packs) will be soon automated, and then the number of vehicles to be produced will rise sharply,” said Panasonic’s chief  Kazuhiro Tsuga.

As Tesla prepares to announced its third-quarter results after today’s closing bell, all eyes are on the company’s Model 3 demand and production numbers. CEO Elon Musk is expected to address questions pertaining to Model 3’s “manufacturing bottleneck” in a Q&A session with analysts beginning at 2:30 p.m. Pacific.

Despite missing last monthÂ’s Model 3 guidance by a significant margin, having produced only 260 units from an expected 1,500 units in September, and public concerns over TeslaÂ’s financial health, Wall Street has largely remained hopeful that the Silicon Valley electric car maker will become a game-changer in the automotive industry. Tesla shares have gained nearly 50% in this year alone, more than three times that of the S&P 500 indexÂ’s 15% growth.

Analysts polled by FactSet are predicting that Tesla will report a third-quarter adjusted loss of $2.31 a share in the quarter, versus an adjusted earnings of $0.71 a share in the third-quarter of 2016. TodayÂ’s expected earnings result would be TeslaÂ’s fourth consecutive quarterly loss. FactSet and Estimize pegs revenue for Tesla at $2.95 billion, which would be down from $2.30 billion in the same quarter last year.

However, any signs that Model 3 demand remains strong and volume production is on track could send the stock upwards. Investors are likely to overlook Tesla’s production shortfalls in the near term if demand for its line of electric cars and energy products is there. “That’s going to be the key factor,” said Argus Research’s Bill Selesky, according to Marketwatch. “Most people realize the production ramp will be difficult to get to.”

Investors will also be looking to glean upbeat news from TeslaÂ’s results pertaining to a factory in China. Recent reports pointed to an agreement reached between the California-based company and the Shanghai municipal government for a Tesla China factory to be built within ShanghaiÂ’s free-trade zone. Having a manufacturing presence in China will allow Tesla to significantly reduce its production costs and streamline its Asia supply chain, while also strengthening the companyÂ’s relationship with the Chinese government.

In addition to Wall StreetÂ’s focus on demand and production numbers, investors will also weigh any off-the-cuff statement by Musk that pertains to TeslaÂ’s semi-truck initiative. The company has delayed the official unveiling of the Tesla Semi twice as it worked to address Model 3 production bottlenecks and aid Puerto Rico in power restoration. The Tesla Semi is expected to be unveiled at the companyÂ’s Design Center in Hawthorne, California on Thursday, November 16.

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