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Tesla (TSLA) will release its Q1 earnings after the bell tomorrow. The earnings come at a time when Tesla stock is trading at its 52-week lows, and is the second-worst performing S&P 500 Index ($SPX) stock of 2024.
The Elon Musk-run company could have been the worst-performing S&P 500 stock YTD, if not for the crash in Globe Life (GL) stock - which plunged by more than 50% in a single session after short seller Fuzzy Panda Research accused it of fraud.
The upcoming earnings call is incredibly consequential for Tesla investors, as the company is battling multiple issues. Can Musk calm investor nerves after failing to do so during the previous couple of earnings calls? Here's what markets can expect from Tesla's Q1 earnings release.
Tesla Q1 Earnings Preview
Analysts expect Tesla to report revenues of $22.3 billion in Q1, which would mark a YoY fall of 4.4%. The expected fall in revenues shouldn’t come as a surprise, as the company’s deliveries dropped 8.5% YoY in the quarter. This was the first time since 2020 that Tesla's deliveries fell on a yearly basis.
It won’t be surprising if Tesla’s revenues fall more than the consensus estimates, as the company has lowered prices multiple times over the last year - which should also lead to lower average selling prices. The price cuts are expected to take an even bigger toll on Tesla’s profits and analysts expect its profits to fall 52% YoY in the quarter.
EV Price War Is Hurting Automakers
The price war has hurt profits across the industry, and Ford (F) expects its 2024 EV losses to widen from the previous years. The company – like fellow Detroit automaker General Motors (GM) – has also scaled down its ambitious EV plans.
As for Tesla, some analysts were not too pleased with the last few earnings calls, and have described them as a “mini disaster” and “train wreck horror shows.” Many have frowned at the vague details that the company has provided to markets.
To be sure, Tesla and Musk haven’t exactly appreciated tough questions during earnings calls historically. However, it’s not often (at least since late 2019) that the company has been under such intense scrutiny as it is now.
Key Questions that Musk and Tesla Need to Answer
Markets will expect Tesla and Musk to answer several key questions during the Q1 earnings call. These include:
The trajectory of the EV transition: Tesla has been among the champions of the EV transition. However, the pace of EV adoption has been much slower than expected. Musk has blamed everything from geopolitical tensions, macroeconomic slowdown, layoffs, and higher interest rates for the slowdown in EV sales. However, sales of gasoline and hybrid cars – which are impacted by pretty much the same variables – have been relatively strong. During Tesla’s earnings call, I would watch out for Musk’s comments on the medium-term trajectory of the EV industry.
Specifically, I would watch for any further color on Tesla’s 2024 delivery guidance. While it warned in the previous call that delivery growth “may be notably lower than the growth rate achieved in 2023,” things look a lot bleaker than that now, considering the steep drop in Q1 deliveries.
New plants: Musk once touted 20 Gigafactories across the world to satiate the demand for its cars. With EV sales moving into the slow lane, the company might need to reconsider those plans. On a similar note, Tesla might provide some color on its rumored plant in India, as well as the announced Mexico plant, whose construction has already been delayed.
Low-cost platform: While Musk denied reports that the automaker has scrapped its upcoming low-cost model, markets will expect more details on that project, where details have been scarce at best.
China competition: I would also watch for comments on the intense competition that Tesla is facing in China – the world’s largest automotive market. Musk has praised Chinese EV companies multiple times in the past, but investors might want to know how the company plans to compete in that market, which is getting more competitive by the day.
Price war and margin erosion: While Tesla made it clear that it intends to prioritize volumes over margins (at least in the short term), the frequent price cuts – the most recent of which happened over the weekend – are making investors jittery. Markets might want to hear more about the company’s pricing strategy, including if Tesla has set a floor for its margins.
Cybertruck recall: Tesla recently recalled all Cybertrucks that it delivered since November to rectify a flaw that caused the accelerator pedal to get stuck. The company might provide more updates about that issue, as it prides itself on its manufacturing efficiency.
Robotaxis and autonomous driving: Musk has said that Tesla will unveil its robotaxi on Aug. 8. I would look out for comments on the robotaxis, as well as the full autonomy of Tesla cars – which missed yet another “end of the year” deadline that Musk set out for 2023.
New AI products: Tesla might provide more updates on its Dojo supercomputer and Optimus humanoid. Bulls expect these upcoming products to be a key driver of Tesla’s growth in the coming years.
Musk’s compensation: Tesla has yet again approached shareholders after a Delaware judge struck down Musk’s previous $56 billion compensation. The mercurial CEO is also seeking 25% voting rights so that he is comfortable building AI products at Tesla. During the earnings call, we might get more details on Musk’s compensation, which has been a burning issue for quite some time now.
To sum it up, the upcoming earnings call could be among the most important for Tesla in the last several years. Tesla seems to be on the back foot amid lower-than-expected volumes, falling margins, and the crash in its stock price. Even some of the former bulls are also getting apprehensive about the company, at least in the short to medium term.
Will we get answers to these (and perhaps many more questions), or will it be the usual Tesla earnings call, where tough questions are usually ducked - or even labeled “bonehead” and “boring?” We’ll have to wait and see.
On the date of publication, Mohit Oberoi had a position in: TSLA , F , GM . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
