Tesla, Inc. TSLA is set to release its fourth-quarter results after Wednesday’s market close, and despite an anticipated modest revenue growth, a decline in profit is widely expected. As the stock has struggled since the second half of 2023, analysts suggest that Tesla faces a challenging task.
What Happened: Analysts, on average, expect Tesla to report adjusted earnings per share of 74 cents and revenue of $25.58 billion, according to Benzinga Pro data. This compares to the year-ago earnings and revenue of $1.19 and $24.32 billion, respectively.
Fund Manager Gary Black shared Tesla’s company-compiled consensus estimates, which indicate expectations of $25.72 billion in revenue and 73 cents in adjusted earnings per share. Gross and operating margin estimates of analysts averaged 17.8% and 8.3%, respectively.
“No one cares about $TSLA 4Q Adj EPS,” said Black. The numbers that matter are the fourth-quarter auto gross margins, excluding regulatory credits, and the 2024 deliveries guidance, the fund manager said, adding that the consensus expectations for these two metrics are at 16.7% and 2.187 million.
Black models fourth-quarter core auto gross margin of 16.1% and adjusted earnings per share of 73 cents. Despite higher fourth-quarter volume relative to the third quarter, the core auto gross margin may have contracted due to higher U.S. inventory discounts to clear legacy Model 3 EVs ahead of the refreshed model launch and higher Model Y inventory discounts in China and Europe, the fund manager said.
“The key investment controversy is whether auto gross margins have bottomed,” Black said. “If yes, $TSLA rises. If not, $TSLA falls (assuming mgmt's delivery guide hits consensus).”
See Also: Best Electric Vehicle Stocks
On the conference call, investors will likely look for signs that auto gross margins have bottomed, the timing of the $25K vehicle, the speed of the Cybertruck ramp, and Optimus timing. A Reuters report said Tesla is considering commencing production of a mass-market vehicle, codenamed “Redwood,” in mid-2025.
For 2024, Black estimates deliveries of 2,200 units, a core auto gross margin of 17%, and adjusted earnings per share of $3.75. This compares to the consensus estimates of 2.187 million units, 17.8%, and $3.80, respectively.
Why It’s Important:
Tesla is grappling with a demand problem as global economic uncertainty weighs down on electric vehicle demand. Wedbush analyst Daniel Ives noted in a recent note that the firm’s proprietary automotive survey revealed that the current “EV buying cycle will clearly be a tougher and longer evolution as it plays out in the market.”
“Thus, OEMs are going to have to navigate a shifting landscape where EVs must further cater to consumer needs to continue the ongoing adoption of EVs over the coming years,” he said.
After tapering off its price cuts in the second half of 2023, Tesla began cutting rates in China and Europe this year. This has reignited fears of protracted margin contraction, likely weighing down on profitability.
The stock reflects these fears and has pulled back toward the $200 mark, a far cry from the early November 2021 peak of $414.50.
In premarket trading on Wednesday, the stock climbed 1.37% to $212, according to Benzinga Pro data.
Check out more of Benzinga’s Future Of Mobility coverage by following this link.
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