October is shaping up to be a critical month for Tesla. It’s been a tough year for the EV maker’s stock, but newfound optimism ahead of next week’s Q3 earnings release helped send shares up 5% on Monday, erasing their previous losses so far this year.
The recent shift in sentiment around Tesla stems in part from the company’s status as an AI darling for several prominent tech bulls, which has helped fuel anticipation for the company’s much-anticipated “robotaxi day” on Oct. 10. That’s when Tesla is expected to provide updates on what it calls its “fully self-driving” software at the event, as well as a demonstration of its planned autonomous “cyber cab.”
To remain profitable, however, Tesla will need to sell cars to use that software. While the news on that front is very mixed in 2024, Barclays analyst Dan Levy predicts quarterly deliveries of around 470,000 vehicles, up 8% from the same quarter last year and beating Wall Street expectations.
For investors, it was a welcome contrast from the previous quarter, when deliveries fell 5% year over year. That figure topped Wall Street expectations, briefly sending the stock higher. But a disastrous earnings call a few weeks later wiped out those gains, sending the stock down 12%, its worst one-day performance since 2021.
Analysts wanted to hear about declining revenues and margins. Instead, they got a long-term pitch about next-gen EVs and AI investments from Musk.
Dan Ives of Wedbush Securities, a well-known Tesla bull, called those gains a “train wreck.” Ted Mortonson, Baird’s chief executive, told Fortune He thought Musk came across as defensive.
It appears the world’s richest man is in a better mood ahead of the company’s Q3 call on Wednesday. The stock has recovered to trade just below $250, down only slightly from its 52-week high of $271. However, its performance still lags far behind the S&P 500’s 21% year-to-date gain, and the recent round of poor earnings results has left many, including The fortune Shawn Tully wonders if the stock is overvalued.
Will China’s software ban benefit or harm Tesla?
This year has also seen a lot of reports about Tesla’s declining market share in the U.S., China and Europe. However, Levy noted in his note that increased deliveries in China this quarter should offset weak electric car sales in the European Union.
As a first mover, it makes sense that Tesla’s overall market share would decline as the EV market grows. Still, a brutal price war launched by Musk himself has emboldened Chinese manufacturers like BYD, famously backed by Warren Buffett’s Berkshire Hathaway, to go on the offensive.
It remains to be seen how the deteriorating trade relations between the U.S. and China will affect Tesla’s business. On Monday, the Biden administration announced that the Commerce Department would propose a ban on Chinese-developed software from all connected cars in the U.S.
The move comes after Biden announced 100 percent tariffs on Chinese electric vehicles in May. Tesla benefits from manufacturing and selling vehicles in both of the world’s largest markets, but could still face collateral damage. The EU recently hit Musk’s Chinese-made cars with an additional 9 percent import tariff, though other manufacturers such as Volvo Car AB parent Geely and BYD were hit much harder.
This story originally appeared on Fortune.com