All eyes will be on Chief Executive Elon Musk Tuesday during Tesla’s (TSLA) first quarter earnings call as investors look for clarity and insight into his strategy and whether Musk is rebranding Tesla in plain sight. TSLA shares sank early Monday.
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It has become increasingly evident in recent weeks that Musk and Tesla are shifting toward an increased focus on autonomy, Full Self-Driving (FSD) and its robotaxi program as EV demand has slowed in 2024.
With Tesla’s first quarter earnings and revenue release late Tuesday, Wall Street might be getting some answers.
Last week, Tesla announced plans to lay off more than 10% of its global workforce, with key executives leaving the company, and Musk saying it is part of the next “phase of growth.”
The layoffs come after Reuters reported on April 6 that Tesla has switched focus from the $25,000 next-generation Model 2 in favor of prioritizing efforts on its robotaxi program. Following the report, Musk quickly announced that Tesla will unveil the robotaxi on Aug. 8.
Musk also took to X, formerly Twitter, on April 6 and said “Tesla is an AI/robotics and sustainable energy company.” The Tesla chief has long said the company is more than just an auto company, but his recent proclamation signals a shift away from the automobile label.
A key question for the Tesla earnings call is whether Elon Musk is shelving the Model 2 for several years.
Adding to the uncertainty, Tesla last week requested shareholders ratify Musk’s $56 billion 2018 compensation plan despite a Delaware court voiding the plan earlier this year. The shareholder meeting is scheduled for June 13. Musk in January posted on X that he was “uncomfortable growing Tesla to be a leader in AI & robotics without” around 25% voting control.
Tesla Stock: Moving Away From EV Business
On Monday, TSLA shares fell 4.9% to 139.90 in Monday market action, hitting a fresh 52-week low of 138.80.
Tesla stock dropped around 2% on Friday, diving 14% for the week and undercutting April 2023 lows.
Deutsche Bank analyst Emmanuel Rosner on Thursday wrote it now appears Tesla’s future is tied to “cracking the code on full driverless autonomy,” which represents a “significant technological, regulatory and operational challenge.”
The analyst added that the shift in focus to the robotaxi is “thesis-changing” and that it could undergo a “potentially painful transition in ownership base” with EV investors “throwing in the towel” and “eventually replaced by AI/tech investors with considerably longer time horizon.”
Meanwhile, Morgan Stanley analyst Adam Jonas wrote Wednesday that “it seems” Tesla is exiting the traditional EV auto industry.
“This doesn’t mean that Tesla won’t keep selling cars (including new launches) for many years to come,” Jonas added.
Bracing For Q1 Earnings
With few details on Musk’s strategy on the robotaxi and the next-generation vehicle, investors and analysts seem skittish ahead of the upcoming first quarter earnings call Tuesday after the market closes.
Analysts project Q1 earnings falling more than 42% to 49 cents per share with sales declining nearly 5% to $22.2 billion. If Tesla Q1 EPS comes in as expected, it would be the lowest quarterly level since the EV giant hit 48 cents per share in Q2 2021. It would be the first year-over-year revenue decline since early in the pandemic.
Tesla recently recast Full Self-Driving from FSD Beta to supervised FSD. That suggests that the EV giant could recognize more deferred FSD revenue, giving EPS a boost. As a result, Tesla’s cash flow will be an important number to watch in Q1.
Tesla also began in April offering free FSD trials with the purchase of a new vehicle. Then, over the weekend, the EV company lowered the annual FSD price by 33% to $8,000. This move comes two weeks after he cut the monthly FSD subscription price to $99 per month, down from $199 per month.
Tesla reported in early April that global first quarter deliveries totaled 386,810 while it produced 433,371 vehicles. The deliveries included a combined 369,783 Model 3 and Model Y units along with 17,027 “other” vehicles. Tesla’s 386,810 deliveries tally in Q1 undercut even the lowest estimates and marks the lowest quarterly deliveries since 344,000 in Q2 2022.
The EV giant blamed the first quarter performance on issues with the production ramp-up of the updated Model 3 along with factory shutdowns.
Meanwhile, Tesla’s Q1 deliveries release was the first time the company included Tesla Energy totals, another sign the global EV giant is officially changing, or broadening, its focus.
Vehicle Price Cuts Keep Coming After Discounts Vanish
Tesla also went back to cutting vehicle prices over the weekend, with EV price reductions in the U.S., China and Europe.
In the U.S., the Model Y now starts at $42,990 before incentives and excluding taxes and fees. The Model S entry price is $72,990 while the Model X starts at $79,990. The Model Y and Model X are eligible for Inflation Reduction Act (IRA) credits of $7,500.
Tesla Cybertruck and Model 3 prices were left unchanged, with production of both EVs still low. This comes after Tesla got rid of all U.S. discounts on existing inventory models last week. Thus, effective Model Y prices are higher in the U.S. than a week earlier.
“Other cars change prices constantly and often by wide margins via dealer markups and manufacturing/dealer incentives,” Musk wrote on X Sunday. “Tesla prices must change frequently in order to match production with demand.”
To maintain sales momentum in 2023 and 2024, TSLA has aggressively cut vehicle prices and offered discounts. Auto gross profit margins, excluding regulatory credits, which peaked at 30% in Q4 2021 amid industry chip shortages, have plunged well below 20%.
Tesla Stock Performance
TSLA stock plummeted 14% last week to 147.05, its worst level since January 2023. Tesla stock is now down more than 16% in April after falling around 13% in March.
The prior week, TSLA gained nearly 4%, buoyed by Elon Musk’s promise of a robotaxi unveiling on Aug. 8. But Tesla stock is now more than 40% off in 2024 and shares are trading well below the 50-day and 200-day moving averages.
Tesla Stock Has Plunged In 2024, But At Least It’s Cheaper, Right? Nope
Meanwhile, Tesla stock has been in a drawdown for nearly 900 days, its second long downturn since its initial public offering (IPO) in 2010, according to Charlie Bilello, the chief market strategist at Creative Planning.
Wall Street consensus has 2024 Tesla earnings firmly below 2023’s level. That signals another year of earnings declines for this growth stock. Wall Street currently expects Tesla earnings per share of just $2.67 in 2024, according to FactSet. That would be more than a 14% decline vs. last year’s $3.12.
Wall Street’s 2024 EPS consensus estimates for Tesla have now come down 30% since the end of 2023.
Looking further out, Wall Street consensus has Tesla’s EPS in 2025 coming in at $3.64, down from the $5.29 projection at the end of 2023, according to FactSet.
The EV giant ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a 28 Composite Rating out of a best-possible 99. Tesla stock also has an 11 Relative Strength Rating and a 67 EPS Rating.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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