After Tesla reported worse-than-expected first-quarter vehicle deliveries Tuesday, analysts cut full-year earnings predictions, with the consensus view dropping $1.00 since the end of 2023. TSLA shares traded higher Wednesday after sinking Tuesday. However, Cathie Wood and her ARK Invest funds continued to load up on Tesla stock Tuesday, making big buys in consecutive trading sessions.
Tesla's deliveries of 386,810 in Q1 undercut even the lowest estimates and marked the lowest quarterly number since 344,000 in Q2 2022. The result was roundly criticized by bulls and bears alike. Tesla blamed the first-quarter performance on the production ramp up of the updated Model 3 along with factory shutdowns.
Ross Gerber, a longtime TSLA supporter who heads Gerber Kawasaki Wealth and Investment Management, posted on X, formerly Twitter, that Chief Executive Elon Musk should be in the crosshairs.
Gerber wrote that Tesla's board of directors should be replaced "immediately" with independent directors.
"It's time for shareholders to assess the blame where due," he wrote.
Musk responded, calling Gerber an "idiot" and claiming it was a "tough quarter for everyone." The Tesla chief pointed to China-rival BYD that saw sales fall more than 40% in Q1 vs. the fourth quarter.
BYD's BEV sales fell 43% vs. Q4, with overall sales off 34%. But BYD's overall and BEV sales climbed 13% vs. a year earlier, with strong gains in March.
Tesla China Rivals Nio, Li Auto, XPeng Rise On March Deliveries
HSBC lowered its price target on Tesla to 138 from 143 on Wednesday and kept a reduce rating on the shares. The firm added that Tesla has cut prices 9% on average year-to-date, but that cheaper cars are not necessarily driving higher volumes.
Meanwhile, Baird also cut its price target Wednesday on Tesla to 280 from 300, with an outperform rating. The firm believes that "several one-timers" impacted Q1 production, however, it speculates that bears will use the lower deliveries as fuel for the demand debate.
Wedbush Securities analyst Dan Ives, a longtime Tesla bull, on Tuesday called the quarter an "unmitigated disaster" for Tesla "that is hard to explain away."
"We view this as a seminal moment in the Tesla story for Musk to either turn this around and reverse the black eye 1Q performance," Ives wrote Tuesday. "Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative."
Tesla stock fell early before gaining 1% to 168.29 during market action Wednesday. On Tuesday, shares sank 4.9% to 166.63. Meanwhile, Cathie Wood purchased 234,998 TSLA shares on Tuesday, according to the company's daily trade disclosure. On Monday, Cathie Wood bought 84,164 shares.
Full-Year EPS Predictions But Q2 Looking Up?
With Q1 done, analyst consensus now has 2024 Tesla earnings firmly below 2023's level. That signals another year of earnings declines for this growth stock. Wall Street currently expects Tesla earnings per share of just $2.81 in 2024, according to FactSet. That would be a 10% decline vs. last year's $3.12.
Wall Street's 2024 EPS consensus estimates for Tesla have now come down more than 26% since the end of 2023. With Tesla reporting earnings on April 23, Wall Street is likely just beginning to cut earnings predictions. Some analysts believe earnings could drop even further, potentially around 2021 EPS of $2.26.
Looking further out, Wall Street consensus has Tesla's EPS in 2025 coming in at $3.85, down from $5.29 at the end of 2023, according to FactSet.
However, with first-quarter deliveries out of the way, Tesla business is expected to pick up in the second quarter with increased Model 3 and Cybertruck sales in U.S. China sales could pick up from a seasonally slow Q1, though competition has intensified in the world's largest EV market.
Wall Street currently forecasts Q2 deliveries of 498,000 units.
Meanwhile, Tesla increased its U.S. prices for all Model Y trims on April 1. Tesla raised prices on Europe Model Y vehicles on March 22. In China, Tesla hiked prices on its entire Model Y line by around $690 on April 1, even as some incentives expired.
But on April 3, Tesla China announced 0% financing for the Model 3 and Y.
To maintain sales momentum in 2023 in 2024, Tesla has aggressively cut vehicle prices and offered discounts. As a result, auto gross margins, which peaked at 30% in Q4 2021 amid industry chip shortages, have plunged well below 20%.
Tesla continues to have large discounts on inventory Model Y vehicles in the U.S. and other markets.
Tesla Stock Has Plunged In 2024, But At Least It's Cheaper, Right? Nope
Tesla Stock Performance
Last week, Tesla stock advanced 2.9% to 175.79, booking a second consecutive weekly gain as the EV company started rolling out its latest Full Self-Driving (FSD) update to customers. TSLA shares are trading below the 50-day moving average.
Emails sent by Elon Musk leaked on social media platforms showing he is making it mandatory in North America to install and activate the latest version of FSD on vehicles and take customers on a "short test ride before handing over the car."
Tesla is also offering a one-month free trial of FSD in the U.S. for new purchases or existing EVs that are FSD capable.
On March 14, Tesla stock dropped more than 4%, hitting new 2024 lows and levels not seen since May 2023. TSLA fell around 13% in March and is the biggest loser on the S&P 500 index so far in 2024.
The EV giant ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a 33 Composite Rating out of a best-possible 99. Tesla stock also has a 10 Relative Strength Rating and a 67 EPS Rating.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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