Tesla (TSLA) stock is angling lower in 2024, falling more than 20% as the EV giant reported worse-than-expected fourth-quarter earnings and revenue in late January.
X
With 2023 in the rearview mirror, analyst consensus now has 2024 Tesla earnings below 2023’s level, signaling another year of negative growth for this growth stock.
Wall Street expects Tesla earnings per share of just $3.07 a share in 2024, according to FactSet. That would be a little less than a 2% decline vs. last year’s $3.12. That was a 23% decline vs. 2022. Analyst project a solid increase in 2025 to $4.24 a share. However, Wall Street has slashed projections from $5.27 at the end of last year and $6.90 at the end of February 2023. Meanwhile, actual Tesla earnings peaked in 2022 at $4.07 a share.
Last week, Tesla CEO Elon Musk touted the long-awaited reintroduction of the Tesla Roadster, claiming on X that the production design is complete. Musk said Tesla will unveil the vehicle at the end of 2024.
The Tesla chief added that the EV giant is “aiming” to ship the new electric sports car in 2025, teasing the design as a collaboration between Tesla and SpaceX.
“We radically increased the design goals for the new Tesla Roadster,” Musk wrote early Wednesday morning. “There will never be another car like this, if you could even call it a car.”
Tesla Stock Declines In 2024
So far in 2024, Tesla stock has retreated around 23%, falling below key levels of support, as the EV giant appears headed for a difficult year after Elon Musk offered a tempered outlook with few specifics on Jan. 24.
On Feb. 19, Morgan Stanley analyst Adam Jonas, a Tesla bull, wrote there is “seemingly overwhelming bearish institutional investor sentiment” on TSLA.
However, as analysts await news on auto gross profit margins, excluding regulatory credits, and whether vehicle pricing will stabilize, the top question for investors is always, when is it a good time to buy or sell Tesla stock.
Delivery Miss Upcoming?
Tesla insurance registrations in China totaled 12,500 last week, up 16% from the prior week, but down 6% compared to a year ago, according to data reported by CnEVPost. Through the first nine-weeks of 2024, Tesla China insurance registrations totaled 77,200, up around 8% vs. the same time frame in 2023.
Meanwhile, Wall Street is currently predicting 489,000 deliveries in Q1, according to FactSet. Tesla is expected to report first-quarter deliveries in early April.
Troy Teslike, whose delivery estimates and Tesla data tracking are highly respected among retail Tesla investors, posted on X Monday that “Q1 is not going well in terms of Tesla deliveries.”
Last week, Troy Teslike said that over the last three years Tesla sales in Q1 have been higher than the preceding Q4.
“That’s not going to happen in this quarter,” the account posted.
Tesla hit a record 484,507 deliveries in Q4 2023. The previous quarterly delivery record was in Q2 with 466,140. Troy Teslike projects the Q1 2024 delivery number will be below Q2’s 466,140.
Tesla Stock: Q4 Earnings
Wall Street slashed 2024 profit projections after Tesla reported worse-than-expected fourth-quarter earnings and revenue in late January, with longtime Tesla bull Dan Ives summing up the conference call as a “train wreck.”
Tesla reported that Q4 earnings fell 40% to 71 cents per share. Meanwhile, quarterly revenue totaled $25.17 billion, up 3.5% vs. Q4 2022. Tesla’s gross profit margin came in at 17.6%, down 612 basis points. For 2023, Tesla EPS fell 23% to $3.12 while revenue increased 19% to $96.77 billion.
In 2024, Tesla’s “vehicle volume growth rate may be notably lower than the growth rate achieved in 2023 “as our teams work on the launch of the next-generation vehicle at Gigafactory Texas,” according to the company.
Tesla said it is also “currently between two major growth waves,” with the “global expansion” of the Model 3 and Model Y vehicle platform “and the next one we believe will be initiated by the global expansion of the next-generation vehicle platform.”
“There’s lots to look forward to in 2024,” Musk said on the earnings call. He added that Tesla is focused on ensuring that its next-generation vehicle, energy storage, full self driving and “other projects” are “executed as well as possible.”
However, without any specifics and no word on its vehicle price cutting strategy or what way profit margins are expected to go in 2024, Wall Street has cut profit expectations. Many Tesla bulls have also turned bearish on the short-term outlook for TSLA.
Tesla Stock No Longer A ‘Best Idea’
After Q4 earnings, Wedbush Securities removed Tesla stock from its list of “best ideas” for 2024 following earnings as Ives outlined a number of items Tesla and CEO Elon Musk must address for TSLA to recover.
Wedbush analyst Ives said that TSLA will remain off the firm’s list of best ideas until there is evidence that Musk and the company takes up their suggestions.
Ives wrote a list of 10 items for “Musk to turn Tesla around.” The firm’s asks include Tesla to announce a $10 billion share buyback program, to create a holding structure for AI initiatives and give Musk more control, stop vehicle price cuts to maintain margin leverage over other automakers, get assurance Musk will not do more TSLA stock sales to fund X, and to give a “hittable” production and delivery timeline for Model 2 and sub $30k vehicle in 2025.
Ives, who has been one of the most bullish supporters of Tesla, cut his Tesla price target to 315, down from 350.
Analysts Voice Tesla Concerns
“We were dead wrong expecting Musk and team to step up like adults in the room on the call and give a strategic and financial overview of the ongoing price cuts, margin structure and fluctuating demand,” Ives wrote.
Meanwhile, Morgan Stanley’s Jonas wrote that the 2024 outlook was the “least detailed we remember.” He added that Tesla profitability could drop toward the $2 per share level.
“Investors and analysts are very much ‘on their own’ when it comes to the FY2024 revenue and growth outlook,” Jonas wrote.
Bernstein analyst Toni Sacconaghi noted in late January that 2024 will be a challenging year for Tesla and that it is becoming “increasingly apparent that 2025 will likely not be better.”
Q4 Earnings Overshadow Record Deliveries
The company delivered 461,538 Model 3/Y vehicles in Q4 and 22,969 “other models.” Tesla currently produces the Model 3, Model Y, Model S, Model X and Cybertruck.
Tesla had been aiming to deliver 1.8 million vehicles in 2023. Ahead of Tesla’s data release, Wall Street consensus had Tesla vehicle deliveries in 2023 totaling 1.797 million, just below that 1.8 million target, according to FactSet.
Cybertruck Event
The pessimism at the end of 2023 followed the excitement surrounding the Nov. 30 Cybertruck event.
Tesla delivered 12 Cybertrucks at its Austin, Texas, factory with pomp and circumstance.
“We have a car here that experts said was impossible, that experts said would never be made,” Chief Executive Elon Musk told the crowd.
The EV giant is offering three trims of the Cybertruck, with the rear-wheel drive version starting at $60,990 with a 250 mile range. The base model will be available in 2025, according to Tesla’s website.
The all-wheel drive version has a starting price of $79,990 with 340 miles of range. Tesla is also offering a top end trim, called the Cyberbeast, starting at $99,990 with a 320 mile range. Both the all-wheel drive version and the Cyberbeast have 2024 deliveries.
Four years ago, Tesla announced the price would start at $39,900.
Tesla Stock Falls Amid Growth Concerns
TSLA shares sank after the company announced worse-than-expected Q3 earnings and revenue on October 18, 2023. Tesla reported third-quarter earnings down 37% to 66 cents per share, the lowest in two years for Chief Executive Elon Musk.
Meanwhile, quarterly revenue increased 9% to $23.35 billion. Tesla’s auto gross profit margins, excluding regulatory credits, fell to 16.3%. Auto gross margins came in at 18.1% in Q2, down from 19% in Q1. That is below the 20% gross margin “floor” Tesla previously targeted.
Elon Musk on the earnings call also preached caution, offering investors warnings about the Cybertruck and the broader economy. The following day, Tesla stock fell 9.3%.
Musk said it will take 12-18 months before the Cybertruck is a “significant positive cash flow contributor.” He added there will be “enormous challenges” in reaching volume production.
Musk has said Tesla will end up producing around 250,000 Cybertruck units per year, reaching that output sometime in 2025.
Tesla Stock And Musk
There is never a dull moment for Tesla and Musk, with the two inextricably linked. After Musk took over Twitter on Oct. 28, 2022 purchasing the social media platform for $44 billion, some longtime Tesla stock bulls worried Musk’s focus on Twitter, along with negative attention, would weigh down Tesla stock.
Musk appeared to lessen those fears when he hired Linda Yaccarino, NBCUniversal’s advertising chief, as the new CEO for X Corp., formerly known as Twitter. The Tesla chief added Yaccarino will focus on business operations while he will work on product design and new technology.
At the time, Wedbush analyst Dan Ives wrote the news ends some of the “distraction risk around the Tesla story.”
However, Tesla stock cut back below a key technical level early on Nov. 16, following a four-day, almost 18% rally. The pullback also came after comments made on X by Chief Executive Elon Musk in support of an antisemitic post.
Meanwhile, Elon Musk on Jan. 15 posted on X that he feels he needs more TSLA shares and voting power before making the EV giant an AI and robotics leader.
Musk wrote that he’s “uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control.” The chief executive added that he wants enough shares to be “influential but not so much that I can’t be overturned.”
On Feb. 3, the Wall Street Journal reported that some Tesla board members felt pressure to do drugs with Elon Musk. The in-depth report said some friends have urged him to go to rehab, and highlighted concerns that the board is not sufficiently independent from Musk.
Tesla’s Global Price Cutting Strategy
To maintain sales momentum in 2023, Tesla aggressively cut vehicle prices and offered discounts throughout the year. Auto gross margins, which peaked at 30% in Q4 2021 amid industry chip shortages, have plunged well below 20%.
Tesla continued cutting prices early in 2024, deciding in January to trim China vehicle prices on the Model 3 and two Model Y variants and slashing Model Y prices in many European countries.
Tesla Juggles Production And Supply
On Feb. 4, the EV giant raised the U.S. price of its Model 3 Long Range variant. The Model 3 LR price is now $46,990, an increase of $1,000. Tesla kept the U.S. price of its Rear-Wheel Drive version at $38,990.
On Feb. 22, Tesla increased the price of its Model 3 Long Range in the U.S. by $250 , bringing the price to $47,740. Back on Feb. 10, Tesla announced limited-time discounts for Model Y variants. However, Model Y inventory is offered at much lower prices.
Meanwhile, the updated Model 3 is no longer eligible for federal tax credits due to stricter battery sourcing requirements. That means the Model 3 is often substantially more expensive than the Model Y.
Troy Teslike, whose delivery estimates and Tesla data tracking are highly respected among retail Tesla investors, on Feb. 23 posted to X that Tesla is “trying to discourage people from ordering a Model 3 version they can’t produce while there is plenty of Model Y inventory waiting for buyers.”
U.S. delivery dates for the updated Model 3 Long Range have been pushed back to April-May. That reflects in large part limited initial production at Tesla’s Fremont plant.
On March 1, Tesla announced big incentives for entry-variant Model 3 and Y vehicles, including insurance subsidies, cheap loan rates and more. In Europe, Tesla cut Model Y prices noticeably in several countries, amid waning sales and reduced subsidies.
On Feb. 12, it raised Model Y prices in some key European markets, though mostly still below where they were before the January cuts. Inventory discounts on the new Model 3 are starting to ramp up in Europe as supply picks up.
Hertz Signals Waning EV Demand?
On Jan. 11, Tesla stock traded below its 200-day moving average for the first since late November as Hertz (HTZ) announced it is selling about one-third of its EV fleet and that it predicts $245 million of incremental depreciation expenses related to the sale in the fourth quarter.
Hertz reported it will sell around 20,000 electric vehicles and that it expects to reinvest a portion of the proceeds from the sales into the purchase of internal combustion engine (ICE) vehicles to meet customer demand. In 2021, Hertz ordered 100,000 Tesla vehicles, with the goal to convert around 20% of its global fleet to EVs.
Tesla Momentum, Competition In China
Tesla ended 2023 on a high in China. However, the EV dynamic in China could quickly change. Musk has said China’s EV companies are Tesla’s main competition — with BYD (BYDDF), Nio (NIO), Li Auto (LI), Nio (NIO) and others all making inroads in the EV market.
BYD, already far above Tesla EV sales including plug-in hybrids (PHEVs), overtook its U.S. rival in global BEV deliveries in the fourth quarter of 2023. Warren Buffett-backed BYD has also decided to open a plant in Europe, moving onto Tesla’s turf on another continent. BYD already is building plants in Thailand and Brazil.
Tesla China delivered 60,365 in February, down around 19% compared to last year, according to according to data released Monday by the China Passenger Car Association (CPCA). However, Chinese New Year ran for two weeks in February, from Feb. 10-Feb. 24.
Tesla deliveries of China-made vehicles in January and February totaled 131,812, down 6% compared to 2023.
In 2023, the Chinese New Year holiday, from Jan. 21-27, significantly affected car companies’ sales across the board in China. Tesla Shanghai was among those shut down for an extended Lunar New Year holiday.
Meanwhile, Tesla is reportedly planning to revamp the Model Y in China with mass production beginning as early as mid-2024, according to Bloomberg. This comes after it launched a new Model 3 with a modest refresh.
But will that be enough? Chinese EV makers keep cutting prices and stepping up vehicle quality and specs.
Tesla EVs In Regulators’ Sights
Entering 2024, Tesla faces mounting pressure from regulators. A recent Reuters investigation found the EV giant has known of faulty suspension and steering parts across its model lineup going back at least seven years, but often blamed drivers when those parts failed.
Norway’s traffic safety regulator recently confirmed that it’s been investigating suspension failures in Model S and X vehicles since September 2022. A resolution is expected soon, with a recall possible.
Sweden announced on December 22, 2023 that it’s also looking into similar issues. The Reuters report could bolster regulators’ probes and provide fodder for class-action lawsuits.
This comes after a National Highway Traffic Safety Administration (NHTSA) investigation recently spurred Tesla to perform an over-the-air software “recall” on more than 2 million vehicles after determining that the Autopilot is prone to misuse after reviewing 1,000 accidents.
The NHTSA’s Autopilot safety probe is ongoing.
Next-Generation Electric Vehicle On The Way?
Musk and Tesla appear to be focusing on the $25,000 next-generation electric vehicle.
Reuters reported ahead of Q4 earnings that Tesla has told suppliers it wants to begin production of a new mass market vehicle, code-named “Redwood,” in mid-2025.
“We’re very far along on our next generation low cost vehicle,” Musk said on the Q4 earnings call.
Musk added Wednesday that Tesla is currently looking to start production sometime in the second half of 2025. However, Musk cautioned his words should be “taken with a grain of salt.”
Throughout 2023, Tesla said it continued to “make progress” on its next-generation platform. The EV company has remained mostly silent on details about the vehicle. At the annual shareholder meeting last spring, Tesla teased a vehicle silhouette.
Musk confirmed on Jan. 24 that the first production line for the next-generation Tesla vehicle will be at its Texas facility. Tesla originally said the new vehicle would first be produced in Mexico, but that proposed plant is on the back burner.
However, it’s unclear when the next-generation vehicle would begin deliveries. Musk has promised “revolutionary” manufacturing to cut costs, but that could take a long time to develop.
Also, it’s unclear if Tesla’s next-gen EV will be eligible for tax credits, depending on its battery sourcing. The Model 3 is no longer eligible for IRA credits of $7,500.
Is Tesla Stock A Buy?
Tesla stock has retreated more than 20% in 2024. TSLA shares have tumbled below the 50-day and 200-day lines after booking six weekly declines between late December and early February. However, shares gained nearly 8% in February. However, TSLA fell 7.2% on March 4.
On Feb. 22, TSLA shares angled 1.4% higher even as EV startups Rivian (RIVN) and Lucid (LCID) cratered on earnings and 2024 outlooks.
On Feb. 5, Tesla stock sank 3.7% to 181.02, hitting a fresh eight-month low of 175.01 intraday. Tesla has a forward price-to-earnings ratio at a lofty 63.4, according to FactSet.
The relative strength line, which tracks a stock’s performance vs. the S&P 500, is at a lowly 16.
In 2023 Tesla doubled, easily outperforming the broader S&P 500 index. Tesla stock ranks eighth in the 35 member IBD Auto Manufacturers industry group. The stock has a 42 Composite Rating out of a best-possible 99. Tesla stock also has a 16 Relative Strength Rating and a 68 EPS Rating.
Almost single-handedly, Elon Musk has turned the auto industry on its head. He has essentially forced it to get aboard the electric-vehicle train. It’s a reason why Tesla has been a monster stock over much of its history, especially during its stratospheric run from mid-2019 to late 2021.
Tesla stock has had mammoth runs and could again. But it’s not a buy right stock now.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
YOU MAY ALSO LIKE:
Get An Edge In The Stock Market With IBD Digital
