Tesla’s Fourth Quarter Earnings and Future Prospects

In 2024, Tesla’s (TSLA) stock has faced volatility, declining over 15% despite a soaring S&P 500. Investors anticipate relief from the electric vehicle (EV) giant’s fourth-quarter earnings, set to be released after Wednesday’s closing bell.

Several factors have contributed to Tesla’s recent challenges, including Hertz shedding EVs, price cuts in China, a production pause in Berlin, and Elon Musk’s untimely stock demand. Analysts estimate Q4 revenue at $25.87 billion, a 6.4% increase YoY. However, adjusted EPS is expected to drop 36.4% to $0.73 due to margin pressures from Tesla’s cost-cutting initiatives initiated in late 2022.

While Tesla reported record Q4 deliveries of 484,507 units, surpassing estimates, questions linger about the profitability “trough” and potential margin improvement. The focus will be on whether the new delivery target for 2024 aligns with expectations. Analysts predict a 21% YoY increase to 2.19 million units, contrasting with Tesla’s earlier 50% CAGR target.

Of interest are Cybertruck deliveries, not specified in the Q4 update, and plans for global sales growth amid potential slowing EV demand. Price cuts in China, US EV tax credits, and an updated Model 3 may boost sales, but challenges like margin-compressing price cuts and reduced tax credits persist.

Analysts, like Morgan Stanley’s Adam Jonas, cite headwinds such as excess capacity in China, Hertz cutting EVs, and falling EV residual values. Jonas lowered the price target but maintained an Overweight rating.

Tesla’s future plans involve starting production of a mass-market EV, codenamed “Redwood,” in mid-2025, as per reports. A wildcard in the earnings call could be Elon Musk’s recent comments about needing greater control for Tesla’s AI ambitions, potentially requiring a new stock-based compensation plan.

Analysts seek clarification on Musk’s remarks, emphasising the importance of Tesla’s AI initiatives and questioning if Musk’s interests align with Tesla’s long-term goals. The market views Tesla as a disruptive tech leader, and any divergence in Musk’s path could pose challenges to the Tesla story, according to analysts like Dan Ives from Wedbush.