How Will Tesla’s Earnings Trend After A Tough Q1 Delivery Report?

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Tesla (NASDAQ:TSLA) is expected to publish its Q1 2024 results on April 23, reporting on a quarter that saw the company’s deliveries fall sharply by 8.5% from a year ago. We expect Tesla’s revenues to come in at $22.8 billion, slightly ahead of consensus estimates but down by about 3% compared to last year. Earnings are likely to come in at about $0.53 per share, slightly below the consensus of $0.54. So, what are some of the trends that are likely to drive Tesla’s results? See our analysis of Tesla Earnings Preview for more details. 

Tesla delivered a total of 386,810 vehicles for the quarter down from 422,875 in the year-ago period. Multiple factors have been dampening demand for Tesla vehicles. High interest rates are making it more expensive for customers to fund vehicle purchases. The effects of the aggressive price cuts Tesla has made over the past year are also likely easing. Competition is also mounting particularly in markets like China, where there are a slew of compelling EVs produced by local manufacturers. Tesla’s pricing power has also been waning, as its inventory builds up with production outpacing deliveries over Q1. Tesla has taken steps to dilute its inventory, offering meaningful price cuts on vehicles it has in stock while charging more for customized vehicles. For example, the long-range and performance versions of the Model Y are seeing discounts of $5,000 or more, of late. This could impact Tesla’s average selling prices as well as hurt margins, which have already come under pressure in recent quarters.  For example, over the previous quarter, Q4 2023, the average price of a Tesla vehicle declined to $44,500, down 16% year-over-year, while gross margins contracted 610 basis points year-over-year to 17.6%. We could see the numbers trend lower over Q1, as well.

TSLA stock has faced a notable decline of 30% from levels of $235 in early January 2021 to around $170 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. However, the decrease in TSLA stock has been far from consistent. Returns for the stock were 50% in 2021, -65% in 2022, and 102% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that TSLA underperformed the S&P in 2022. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Consumer Discretionary sector including AMZN, TM, and HD, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could TSLA face a similar situation as it did in 2022 and underperform the S&P over the next 12 months – or will it see a recovery?

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We continue to believe that Tesla will remain a big beneficiary of the long-term transition to cleaner transportation and energy generation, given its well-oiled supply chain, superior battery and drive-train tech, and its lead with software and self-driving technology. That said, the company is likely to see its deliveries and earnings face pressure this year, falling well below the company’s multi-year target of 50% annual growth in revenues.  Although we are maintaining our $210 price estimate for Tesla, which is about 23% ahead of the current market price, we will be revisiting our price estimate post the company’s Q1 results. See our analysis on Tesla ValuationIs TSLA Stock Expensive Or Cheap? for more details on Tesla’s valuation and how it compares with peers. For more information on Tesla’s business model and revenue trends, check out our dashboard on Tesla RevenueHow Does TSLA Make Money?

 Returns Apr 2024
MTD [1]
YTD [1]
Total [2]
 TSLA Return -3% -31% 1101%
 S&P 500 Return -2% 7% 129%
 Trefis Reinforced Value Portfolio -3% 3% 631%

[1] Returns as of 4/14/2024
[2] Cumulative total returns since the end of 2016

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