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[Earnings Preview] Tesla, signs of a strategic shift. What will be the driving force for future growth?

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moomooニュース米国株 wrote a column · Apr 19 03:52
Leading US EV company $Tesla (TSLA.US)$is5:00 AM on April 24th, Japan timeにScheduled to announce the Q1 earnings for 2024.
According to market consensus, Tesla's Q1 revenue decreased by 3.46% compared to the same period last yearto 22.521 billion dollarsdecreased byA decrease of 39.48% to $0.44Is expected.
Source: moomoo
Source: moomoo
Tesla has started 2024 with a significant rough patch. A decrease in customer deliveries is expected to drag down earnings, with indications of intentions to reduce personnel due to declining demand and intensified competition. Over the past few months of a series of bad news, Tesla's stock price has fallen by nearly 40% year-to-date, becoming the worst performing major stock this year.
Due to a general decline in demand for electric vehicles and intensified competition from China, the company reported a 40% decrease in quarterly profit year-on-year in the Q4 23 earnings call released in January, with revenue growth also falling short of the financial estimates at 3%. In addition, the customer deliveries for the first quarter, released at the beginning of the month, plummeted sharply compared to the same period last year, presenting nightmare-like figures for the company. The EV giant is facing a difficult year.
Source: moomoo
Source: moomoo
The slowing demand for EVs and shrinking profit margins
The customer deliveries released on the 2nd of this month in the first quarter by TeslaIt significantly fell well below the expected 0.44 million 9000 units, a decrease of about 8.5% from the same period of the previous year's 0.38 million 6810 units..It became the lowest level since the 0.34 million 4000 units in the second quarter of 2022 as a quarterly result.The company attributes the lower customer delivery figures in the first quarter to decreased consumer purchasing desire due to high interest rates, as well as operational shutdowns at the factory and issues with the production launch of the improved Model 3.
Source: Investopedia
Source: Investopedia
The Tesla bullish analyst from Wedbush Securities, a long-time Tesla supporter, stated that it would be key for Tesla to clearly demonstrate its growth strategy in the Chinese and global markets at next week's earnings call, to reverse concerns about demand.
The automotive market is highly cyclical, with the possibility of a sudden decrease in demand depending on the economic situation. Tesla, a leading EV company, is facing intensified competition from traditional auto manufacturers and new entrants. If low-priced EVs enter the market, the company will be forced to continue lowering prices, potentially reducing industry-leading profits.
Furthermore, despite the slowing growth last year, the company increased its research and development expenses, further squeezing profit margins that were already decreasing due to price reductions.The profit margin in Q4 of 23 decreased to 17.6%, down from 23.8% in the same period of the previous year.Attention is focused on whether the profit margin in Q1 of 24 will approach around 18% from the previous period or decrease significantly.
Fully Self-Driving (FSD) technology.
On the 26th of last month, Tesla has been introducing a driving assistance feature called 'Fully Self-Driving (FSD) Capability' to existing and new customers in the USA for free for one month. Furthermore, on the 12th of this month, Tesla lowered the price of Full Self-Driving (FSD) from $199 to $99 per month, aiming to expand the usage of the 'Fully Self-Driving' software.
As the Level 3 'Fully Self-Driving' software technology, an important part of Tesla's strategy, improves, we expect an announcement from the management on when this technology will be introduced and when they can start generating monthly subscription revenue.
Low-priced models and self-driving taxis.
On April 5, Reuters reported that Tesla plans to stop the development of affordable low-cost EVs and focus on developing autonomous driving software to launch robotaxis. However, Tesla officials, including CEO Elon Musk, denied this report.
Shortly after that, Elon Musk posted on X (formerly Twitter) that the driverless 'robotaxi' will be announced on August 8th. Facing the stagnation in sales and profit pressure due to price cuts, Musk has been emphasizing the importance of autonomous driving technology. Prior to this, he had stated the goal of starting robotaxi production by the end of the year, prioritizing the development of robotaxis over the low-priced models that have supported growth expectations for Tesla.
Morgan Stanley analysts said that the cancellation or postponement of Model 2 may be due to the recognition that manufacturing and selling EVs with traditional consumer models may not generate sustainable economic value.
It is believed that it may take several years for full realization of robotaxis, but the market is expecting the release of Model 2, which is expected to be priced around $50,000, within the next 18 months. However, Elon Musk, CEO, appears to be more focused on robotaxis than the affordable Model 2, which could further test investor patience.
For Wall Street analysts, robotaxis and Full Self-Driving (FSD) are expected to be the driving forces of Tesla's future growth, but they come with significant risks. Analyst Alexander Haissl from Deutsche Bank, who downgraded Tesla the previous day, stated that the company's strategy has changed and emphasized the risk of focusing solely on robotaxis and deviating from the core production of electric vehicles. He also warned that if the whole company is bet on robotaxis, it may face long-term challenges.
This article utilizes automatic translation for certain parts.
Source: Morningstar, Forbes, Yahoo Finance, Investopedia, Dow Jones
—moomoo News Vicky
[Earnings Preview] Tesla, signs of a strategic shift. What will be the driving force for future growth?
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