Tesla (TSLA) shares edged higher in early Thursday trading, but are still caught in one of the longest downtrends since the stock went public in 2010, as investors count the costs of fading EV demand, weakening profit margins and the distracted leadership of CEO Elon Musk.
Many of those concerns, as well as the impact of supply chains disrupted by military attacks in the Red Sea and suspected arson at a key manufacturing facility in Germany, combined to produce one of the biggest quarterly delivery misses on record for the world's leading EV maker.
Tesla handed over just under 387,000 new cars to customers over the three months ended in March, a 20% decline from the record 484,000 it notched over the final months of last year and down around 8.5% from year-earlier levels.
The tally was also firmly shy of Wall Street's 455,000 forecast, marking the biggest miss to estimates since the Street began compiling data in the mid 2010s.
The muted delivery figures, which followed a warning from Tesla earlier this year that full-year totals would be "notably lower" than they were in 2023, will add a new and likely bearish dimension to the group's first-quarter earnings, given the ongoing pressure on its profit margins.
Tesla is slated to report its first quarter earnings after the market closes on April 23.
Tesla: More margin weakness ahead
Tesla's profit margins, probably the most closely tracked metric by analysts on Wall Street, narrowed to 17.6% over the three months ended in December, down from a 23.8% margin over the year-earlier period.
Weaker-than-expected sales figures from China, where last month's volumes fell to the lowest levels in more than a year, are also adding to overall pressures on the market's aggressive full-year delivery targets.
Morgan Stanley Adam Jonas, however, sees the weak first-quarter update as further evidence of a "shakeout" phase in the EV market. He revised his own 2024 delivery tally down by around 250,000 units to 1.75 million unit. That would be a 3.3% decline from 2023 levels.
Related: Analysts see big strategy shift from Elon Musk after Tesla delivery debacle
Jonas, who lowered his Tesla price target by $25 to $320 a share only last month, hived another $10 from its Thursday to take it to $310. But he left his buy rating in place.
"Negative developments in the global EV market very much matter to Tesla and should reasonably have a negative near-term impact on the price of the stock," Jonas said in a client note titled "Near Term Fearful vs. Long Term Greedy."
“We think numbers bottom by 2Q results, well before a major rejuvenation of the model cycle," Jonas added.
Jonas, who has long-touted Tesla's potential beyond its core carmaking business, stressed that investors should not ignore the "continued developments of Tesla’s other plays, many of which are auto-related" as well as "other areas that we do not include within our $310 target.”
Tesla's other projects still have value
Jonas has argued that Tesla should be valued at more than its current market price based on the host of other business dynamics tied to EV sales. These include the licensing of its Full-Self-Driving driver-assistance system as well as its battery, energy and insurance divisions.
The analyst also says Tesla's DoJo supercomputer, which is powered by AI technologies, could add more than $500 million to Tesla's market value "through a faster adoption rate in mobility [robotaxis] and network services [software as a service]."
Musk himself said competition for AI engineers is the "craziest talent war I’ve ever seen." He told his 180 million followers on his X social-media website that he has been "“aggressively recruiting Tesla engineers with massive compensation offers," adding upward pressure to a cost base that isn't seeing offsets from higher vehicle prices.
Related: Analyst who correctly predicted Tesla's stock drop revamps target
Analysts expect Tesla to post a bottom line of around 56 cents a share for the three months ended in March, down a third from 85 cents a share in the year-earlier period, on revenue of around $26.05 billion.
Gross-profit margins, based on Refinitiv forecasts, are likely to narrow to around 17%, with estimates ranging between 14.7% and 20%.
More Tesla:
- Analysts update Tesla stock outlook after yet another EV price change
- Cathie Wood buys $35 million of beaten-down tech stock
- Analyst reveals new Tesla price target, Mag 7 risk as shares extend slump
Tesla shares were marked 1.26% higher in pre-market trading to indicate an opening-bell price of $170.48 each, a move would still leave the stock down more than 31.5% for the year.
Tesla has been in a drawdown for 879 days, the 2nd longest downturn since its IPO in 2010. Currently 59% below its November 2021 peak. $TSLA https://t.co/rOfk1lOe87 pic.twitter.com/Lmy1V7O5bb
— Charlie Bilello (@charliebilello) April 3, 2024
Short interest in the stock remains highly elevated, with data from S3 Partners suggesting it hit a 2024-high of 3.9% of the float outstanding last week.
Betting against the group has been highly profitable, as well, with short sellers up more than $5.77 billion so far this year, according to S3 data.
Related: Veteran fund manager picks favorite stocks for 2024
