Tesla (TSLA) stock is angling lower in 2024, falling around 30% as the EV giant reported worse-than-expected fourth-quarter earnings and revenue in late January.
XWith 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.
Meanwhile, Morgan Stanley Tesla bull Adam Jonas recently issued an investor note in which he cut his Tesla 2024 earnings projections by 25%, saying that the EV giant could "potentially" lose money this year.
Jonas slashed his Tesla price target to 320, down from 345, but maintained an overweight rating on the shares. Jonas also whittled down his Tesla 2024 EPS projections to $1.51, his previous view was $2.04 per share, with auto gross profit margins, excluding regulatory credits, sinking to 11.4% as the analyst foresees continued demand issues for EVs.
"EV demand continues to decelerate despite continued price cuts. Fleets are dumping EVs and strong hybrid momentum is competing for the marginal EV buyer," Jonas wrote on March 5. "If there was ever a time for Tesla to potentially post a GAAP EBIT loss in the auto business, it may be this year."
Wall Street expects Tesla earnings per share of just $2.96 a share in 2024, according to FactSet. That would be a around a 5% decline vs. last year's $3.12. That was a 23% decline vs. 2022. Analyst project a solid increase in 2025 to $4.13 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.
Tesla Stock Declines In 2024
So far in 2024, Tesla stock has retreated 30%, falling below key levels of support, as the EV giant appears headed for a difficult year after Chief Executive Elon Musk offered a tempered outlook with few specifics on Jan. 24.
Wells Fargo downgraded Tesla to underweight, down from equal weight, last week with a price target of 125, down from 200. The firm's underweight rating is equivalent to a sell rating and its price cut represents a 30% downside risk to current TSLA levels.
Wells Fargo expects Tesla unit volumes to disappoint as price cuts with its view that vehicle price cuts are having a diminishing impact on demand. The firm also wrote Wednesday that it believes that the economics of Tesla's next-generation vehicle, widely known as the Model 2, "are likely tough" as a mass market compact vehicle.
UBS also cut its Tesla stock price target to 165, down from 225, and maintained a neutral rating on the shares. UBS also lowered its Q1 delivery forecast to 432,000 units, from its previous 466,000 view. The firm also cut full-year deliveries to 1.96 million units, down from 2.02 million previously.
This comes after Everscore wrote that Tesla's new cheaper vehicle may not ramp up until 2027, with 500,000 units in 2026.
"Tesla increasingly is a '2027 story,'" Evercore analysts wrote.
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?
With the first quarter ending in just two weeks, Tesla appears to be heading for a delivery miss. Wall Street consensus currently has Q1 deliveries of 481,000 units, according to FactSet. Meanwhile, many analysts have cut predictions in recent days.
Tesla is expected to report Q1 deliveries in early April.
Deutsche Bank analysts last week wrote they expect Tesla to miss consensus estimates "by a wide margin." The firm lowered its delivery Q1 estimate to 427,000, down from 476,000, due to low Model 3 production in the U.S., a slow Cybertruck ramp up and overall weaker EV demand.
Deutsche Bank also cut full-year deliveries estimate to 1.96 million units, below the consensus of 2.1 million.
Meanwhile, Gary Black, managing partner of the Future Fund, recently posted on X that Wall Street's consensus Q1 delivery view is too high. Black estimates Tesla will deliver 425,000 units in Q1, slightly above the 422,875 units Tesla delivered in Q1 2023.
Tesla hit a record 484,507 deliveries in Q4 2023. The previous quarterly delivery record was in Q2 with 466,140.
Wedbush Securities analyst Dan Ives expects around 430,000 Q1 deliveries but is optimistic that deliveries will track higher throughout the year.
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.
At the time, 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.
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."
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.
However, Tesla currently looks set to raise Model Y prices across all its key sales regions in what many analysts see as a gamble to drum up additional first-quarter sales.
Tesla is reportedly increasing Model Y prices in China on April 1, according to local media reports on March 20. The move comes after the EV giant already announced plans for Model Y price increases in Europe and the U.S., beginning on March 22 and April 1, respectively.
The company will increase the price of all Model Y trims in the U.S. by $1,000 next month while Model Y prices in Europe will go up by around $2,100 on Friday. In China, Tesla will increase Model Y prices by $700. Tesla is also offering discounts on inventory Model Y vehicles of between $1,000-$1,500.
Pricing Just A Marketing Ploy?
Evercore analyst Chris McNally wrote Monday that the recent price increase announcements are likely a marketing push to sell production and inventory into quarter-end as Q1 deliveries appear weak.
McNally added it "may also be logical to ponder whether constant price changes (primarily communicated over X) is confusing or even negative for brand sentiment."
Deutsche Bank wrote Monday that in light of "persistently high" Model Y inventory, the firm believes Tesla's preview of future price increases as an attempt to boost sales this month, rather than a sign of solid demand.
Troy Teslike, a respected source of delivery estimates and Tesla data tracking among retail Tesla investors, wrote on X, formerly Twitter, Saturday that the U.S. price increase is "not because of too much demand."
"Base on the latest data, inventory is currently high," Teslike posted. "Tesla's message is to buy now before the increase."
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 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) 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 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 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 about 30% 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. TSLA remains down more than 13% in March.
Last week, Tesla stock dropped 6.7% to 163.57. On Thursday, Tesla stock fell 4.1% to 162.50, hitting new 2024 lows and levels not seen since May 2023.
Charlie Bilello, the chief market strategist at Creative Planning, has noted in March that Tesla stock has been in a drawdown for 861 days, the second longest downturn since its initial public offering (IPO) in 2010. Tesla stock is about 60% below its November 2021 high 0f 414.50.
On Feb. 22, TSLA shares angled 1.4% higher even as EV startups Rivian (RIVN) and Lucid (LCID) cratered on earnings and 2024 outlooks.
The relative strength line, which tracks a stock's performance vs. the S&P 500, is at a lowly 10.
In 2023 Tesla doubled, easily outperforming the broader S&P 500 index. The EV giant ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a 31 Composite Rating out of a best-possible 99. Tesla stock also has a 10 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.
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