Tesla Earnings Slide 40%; Next-Gen Vehicle Teased As Elon Musk Says 'We Don't Have A Crystal Ball'

 

Tesla (TSLA) reported worse-than-expected fourth-quarter earnings and revenue late Wednesday and Chief Executive Elon Musk warned investors that the EV giant doesn't know what way profit margins will go in 2024. TSLA shares fell on the news.

 

Tesla reported Wednesday 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.

 

Wall Street had forecast Q4 EPS falling 39% to 73 cents with revenue increasing 5% to $25.62 billion. For the full 2023 year, analysts predicted earnings dipping 25% to $3.05 per share with sales of $97.46 billion, up 20%. Wall Street consensus had auto gross-profit margins, excluding regulatory credits, hitting 15.7% in Q4, according to FactSet.

 

"There's lots to look forward to in 2024," Musk said on the earnings call Wednesday. 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."

 

Ahead of earnings, analysts were not overly optimistic. TSLA stock has slumped to begin 2024 with the company continuing to cut vehicle prices — putting pressure on margins — as electric vehicle supply outstrips demand. The EV giant is also not expected to see profits grow in 2024 compared to 2022 levels.

 

Musk also recently threatened he needs more TSLA shares and voting power in order to make the EV giant an AI and robotics leader.

 

Tesla stock retreated nearly 5% after the market closed Wednesday. During regular market action, TSLA erased early gains, closing off 0.6% to 207.83. The stock is down 2% on the week.

 

Tesla's Next-Generation Vehicle Coming Soon?

Tesla reported Wednesday that in 2024 its "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."

 

The EV giant added that it is "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."

 

Reuters reported late Tuesday 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 but cautioned that "this is an earnings call not a product announcement."

 

Musk added Wednesday that Tesla is currently looking to start production sometime in the second half of 2025. However, he cautioned anything he says 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 Wednesday 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.

 

Tesla Earnings: All Eyes On Price Cuts

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's auto gross profit margins, excluding regulatory credits, fell to 16.3% in Q3 after coming in at 18.1% in Q2 and 19% in Q1.

 

With Tesla continuing to cut prices early in 2024, deciding in January to trim China vehicle prices and slash Model Y prices in many European countries, analysts see auto gross-profit margins as a key question in 2024.

 

Musk said Wednesday Tesla does not know where auto gross margins will go in 2024.

 

"We don't have a crystal ball," Musk said. "If interest rates come down quickly I think margins will be good and if they don't come down quickly they won't be that good."

 

The consensus among analysts for 2024 has Tesla EPS down to $3.63 a share vs. $3.81 at the end of last year. It was $5.65 at the end of January 2023. The current forecast is well below Tesla's 2022 levels.

 

Last week, Gary Black, managing partner of the Future Fund, posted on X that based on the January price cuts he was revising 2024 earnings estimates to $3.75 per share, down from $3.90 per share.

 

Black added that Tesla management "still does not see that cutting configurator prices and inventory discounts by the same amount is value destructive."

 

Tesla's Record Q4 Deliveries Take A Back Seat

Tesla reported on Jan. 2 that deliveries in the fourth quarter exceeded Wall Street predictions, with the global EV giant selling a record-setting number of vehicles and hitting full-year expectations.

 

Elon Musk's Tesla reported that it delivered 484,507 vehicles during the fourth quarter and 1.81 million in 2023, exceeding its 1.8 million target.

 

However, reaction among analysts was muted as Wall Street appears squarely focused on potential profit struggles in 2024.

 

TSLA bulls remain focused on Tesla's AI and robotics potential, the newly launched Cybertruck, the expected next-generation vehicle and decisions by legacy automakers to scale back EV plans.

 

Tesla began rolling out FSD (full self driving) Beta Version 12 to some paying customers on Sunday night. Musk added Wednesday that FSD Beta Version 12 will be available for all Tesla vehicles in North America in the coming weeks.

 

The EV company also announced Wednesday that Cybertruck production and deliveries "will ramp" throughout 2024.

 

Tesla Earnings: Stock Performance

The stock has retreated 16.4% in January. Last week, Tesla stock fell 3% for its fifth straight weekly decline. In the last two weeks, TSLA has tumbled below the 50-day and 200-day lines. Investors could use 265.13 and 278.98 as potential buy points. Tesla stock is technically in an awkward double-bottom base, according to MarketSmith analysis.

 

The relative strength line, which tracks a stock's performance vs. the S&P 500, is at its lowest level since late May, according to MarketSmith.

 

On Monday, Morgan Stanley analyst Adam Jonas cut his TSLA price target to 345, down from 380, but kept an overweight rating on the shares.

 

"Global EV momentum is stalling. The market is oversupplied vs. demand," Jonas wrote.

 

In 2023 Tesla doubled, easily outperforming the broader S&P 500 index. Tesla stock ranks fifth in the 35-member IBD Auto Manufacturers industry group. The stock has a 60 Composite Rating out of a best-possible 99. Tesla stock also has a 66 Relative Strength Rating and an 88 EPS Rating.

 

Norton, K. (2024) Tesla earnings slide 40%; next-gen vehicle teased as Elon Musk says ‘we don’t have a Crystal Ball’, Investor’s Business Daily. Available at: https://www.investors.com/news/tesla-earnings-slide-40-next-gen-vehicle-elon-musk/ (Accessed: 25 January 2024).