Tesla Motors is scheduled to release its next earnings report on Wednesday after closing bell, and consensus estimates suggest losses of 60 cents per share and $1.16 billion in revenue. The EV manufacturer has set pretty high delivery targets for itself in the second half of this year and stands a good change at missing delivery expectations in the June quarter.

Tesla Motors Inc Earnings: Are Expectations Too High?

Sell-side analysts see a sharp correction ahead for Tesla shares, and tomorrow’s earnings report could be a negative catalyst for the stock. Looking back at stock price movement of Apple and other Wall Street favorites following their June quarter reports also suggests that Tesla shares will decline following tomorrow’s report.

UBS downgrades Tesla

UBS analyst Colin Langan is now firmly in the bear camp on Tesla. He downgraded Tesla to Sell and set a price target that’s about 20% below where the automaker’s shares are trading right now. He cited two main reasons for his downgrade: valuation and energy storage expectations.

According to Langan, Tesla’s current share price suggests that the company delivers 1.565 million vehicles a year and hits earnings of $46 a share in a relatively short time span. You may recall that CEO Elon Musk said they will be producing “a few million” vehicles by 2025.

Langan sees this as unlikely because he said it would require the automaker to build two more assembly facilities and gigafactories. Also at the suggested size, Tesla would be only slightly smaller than competing luxury automakers BMW and Audi (Graphs in this article are courtesy UBS.).

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UBS is bearish on energy storage opportunities

Further, the analyst noted that shares of Tesla have climbed 35% since Musk tweeted in March about their plans to enter the energy storage market. He estimates demand in the storage market will be at around 3.2 gigawatts by 2020.

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However, he said the industry estimates demand of over 7.2 gigawatts. Additionally, he thinks Tesla’s share price suggests that it would hold 75% of the energy storage market, which he says is unlikely.

Langan pointed out that Tesla bulls continue to say the company’s fundamentals don’t matter, but he thinks a sharp correction in Tesla shares is likely. He noted that the automaker’s second half delivery targets suggest a 50% increase from the first half of the year because the Model X is going into production. A report last week suggested that the crossover is now in production because the EV manufacturer has paused tours of its factory.

He also remains concerned about Tesla’s selling, general, and administrative and research and development expenses as the EV manufacturer designs, develops, and puts the Model 3 into production.

Key questions for Tesla’s earnings call

So what else will analysts be focusing on in Tesla’s earnings call this week? Deliveries and production rate will be huge topics In the second quarter, Tesla delivered 11,507 vehicles, a 14.5% increase from the first quarter’s 10,045 deliveries. For the full year, the EV manufacturer expects to deliver 55,000 vehicles, which is quite a tall order after not delivering even half of that number in the first half of the year. Tesla expects Model X deliveries to boost its delivery numbers in the second half.

Last year the company missed its guidance for 35,000 deliveries, and Trefis analysts say this was mainly because of a lagging production rate. The automaker guided for 12,500 units to be produced during the June quarter, so we should find out tomorrow how well it did. Tesla aims to produce 2,000 vehicles a week.

Trefis analysts also want to find out the lag time between production and delivery of Tesla’s vehicles. They estimate that nearly 80% of the vehicles produced in the fourth quarter of last year were delivered. Tesla management is aiming to reduce the lag time between production and delivery, and this is indeed going to be an important metric going forward.

Automotive margins are also important because they provide a clue in terms of vehicle mix and whether buyers are leaning toward the more expensive or the least expensive models. Tesla is also expected to give an update on its new energy storage business, which recorded a huge order backlog not long after the company made the storage units available for purchase.

As of this writing, shares of Tesla Motors were up 1.04% at $262.68 per share.