Tesla stock could fall after upcoming Q2 earnings report says Barclays

Barclays analysts reiterated an Equal Weight rating on Tesla (NASDAQ:) shares as the electric vehicle (EV) maker prepares to report Q2 earnings.

Analysts believe Tesla stock has a “tough set-up” into the earnings report as momentum has outweighed fundamentals. The analysts’ price target of $260 per share signals a 6.4% potential downside from current levels.

“Auto gross margin will be the key focal point. Our estimate of 17.5% (-150bp q/q) reflects price headwinds partially offset by volume and raw mats. We assume our margin estimate is in-line with the street or slightly better,” they wrote in a note.

“The larger focus may be on the trajectory of margins, with investor hopes that 2Q is the trough. It’s unclear how much clarity we’ll receive, as price elasticity of demand is a critical component…and thus far price cuts haven’t driven volume as much as desired.”

Overall, analysts see a “tough” set-up for Tesla stock.

“Flat margins + commentary of trough margins could drive the stock higher, or at least help investors to look past near-term choppiness. Conversely, signs of ongoing margin weakness could lead stock to sell-off.”

Analysts recently downgraded Tesla stock and continue to see near-term fundamentals as “challenging,” a situation that is likely to limit the upside in TSLA stock.

Tesla shares are up 1.7% in pre-market Monday.