Source: Zhitong Finance

$Tesla (TSLA.US)$The first quarter earnings report will be announced after the close of trading this Tuesday. At a time when investor sentiment is declining, Tesla will provide much-needed updates on the current situation and future prospects.

Bloomberg agreed that Tesla's adjusted earnings per share for the quarter would be $0.52 and operating income would be $22.31 billion. This will be Tesla's first decline in revenue in four years.

In terms of profitability, Tesla is expected to achieve operating profit of 1.49 billion US dollars, down 40% from the same period last year. Using non-GAAP metrics, Wall Street expects adjusted net profit of US$1.79 billion and profit before interest, tax, depreciation and amortization (EBITDA) of US$3.32 billion.

According to 20 analysts surveyed by Visible Alpha, Wall Street expects the gross margin of cars not included in policy credits to be 15.2%, down from 19% in the same period last year, the lowest since the fourth quarter of 2017.

Slowing demand raises questions

Tesla's performance in the first quarter was a roller coaster. The fourth quarter results announced by the company were disappointing, and the 2024 delivery guidance issued was weak and vague. Furthermore, first-quarter deliveries fell short of expectations, and reports that mass-produced electric vehicles under $30,000 died were not refuted, so the stock price was hit hard.

By Monday's close, Tesla's stock price had fallen by about 43% so far this year, down 19% from the current seven-day decline.

Currently, Tesla's sales growth is slowing down, which is expected to have a significant impact on the results announced on Tuesday. Tesla's first quarter deliveries fell short of expectations. In the first quarter, Tesla delivered 386,810 vehicles worldwide, far below expectations of 449,080 vehicles; production of 433,371 vehicles was also lower than the expected 452,976 vehicles.

The difference between production and sales volume is about 46,500 units, which has sparked investors' concerns about Tesla. The automaker may be facing weakening global demand, which in turn has led to round after round of price cuts. Last weekend, Tesla announced a series of price cuts for its Model 3, ModelY, and other models around the world, further weakening profit margins.

The rumored Model 2

Investors will also keep an eye on Tesla's future product roadmap. The long-awaited next-generation platform will support mainstream electric vehicles under $30,000 (known as Model 2), and the platform will use a revolutionary “out-of-the-box” production line to produce these cars at a lower cost.

Investors are hopeful that Model 2's sales will increase. Musk previously promised in January to launch this low-cost car in 2025. The CEO may face sharp questions from investors about the fate of Model 2 in a conference call after the earnings report.

Earlier, however, foreign media reported in early April that Tesla had cancelled the Model 2 plan and switched its focus to manufacturing the autonomous robot taxi Robotaxi on the same small car platform. Musk initially posted on social media that it was a “lie,” but so far he hasn't pointed out any untruths or clarified the fate of the model.

Tanaka Growth Fund portfolio manager Graham Tanaka has been optimistic about this bull stock since the early days of Tesla stock, but now he claims that due to the uncertainty of Model 2 and the slow production of Cybertruck electric pickups, he has liquidated his last position in recent days.

“Model 2 was supposed to be a moat for Tesla's business model, but at least it's been delayed for now.” He said, “We think it will be more risky to own Tesla next year because we don't know how fast the Cybertruck will be mass-produced.”

According to information, Musk was expected to meet with Indian Prime Minister Narendra Modi (Narendra Modi) on Monday and announced a major investment in an automobile factory, which is expected to produce a small, affordable model. However, Musk called off the meeting at the last minute, citing “Tesla's heavy responsibilities.”

There is no shortage of voices from analysts who are optimistic about Model 2. Emmanuel Rosner (Emmanuel Rosner) of Deutsche Bank (Deutsche Bank) wrote in a report earlier this month that the Model 2, as a mass-produced model, will “re-drive sales, profit margins, and accelerated FCF (free cash flow) growth.” This also means that Tesla's “bull market theory” is based on Tesla breaking the code for autonomous driving, which requires passing through a series of regulatory hurdles and obtaining sufficient data to train the software.

Analysts such as Bank of America's John Murphy (John Murphy) believe Model 2 is not dead yet.

“In an earnings call for the fourth quarter of '24, management mentioned that the car is under development and that the optimistic SOP (production time) will be [the second half of 2025], but CEO Elon Musk acknowledged that due to the introduction of new technology, the production process may be slower than expected,” Murphy wrote in a note to customers on Monday. “In our opinion, Tesla is still developing Model 2 because it's a fundamental part of the company's growth story.”

Is Robotaxi building the future?

It is undeniable that Tesla is still the most valuable automobile manufacturer in the world, with a market capitalization of around US$468 billion, but this is down two-thirds from the record high set in November 2021. Historically, Tesla's valuation was mainly based on large-scale sales of electric vehicles and breakthrough advancements in autonomous vehicles.

Since foreign media reported the Model 2 strategy shift, analysts have noticed that this change may cause investors who are betting on rapid sales growth to flee the company's shares. Analysts say these investors are likely to be replaced by others willing to wait for a self-driving Tesla.

Musk has predicted for years that fully autonomous cars will be around the corner, but due to huge engineering and regulatory challenges, it may be a few years away from being realized. Tesla is facing lawsuits and investigations regarding its autonomous driving and fully autonomous driving systems, which do not make cars fully autonomous.

Musk's recent social media post about Tesla's autonomous vehicle strategy has raised more questions. He recently joked that “Robotaxi” will be unveiled on “August 8,” probably referring to August 2024. He later tweeted that “going nowhere” in autonomous driving is a “very obvious” move.

To stimulate consumer interest, Tesla recently offered a free trial of “fully autonomous driving” and cut the price of the option from $12,000 to $8,000 last weekend.

Cybertruck will also attract widespread attention from investors. Tesla wants to increase sales and profit margins, but its latest model, the Cybertruck, may not be of much help, and it has proven difficult to mass-produce this model. The company did not separately report production figures for this pickup truck, but last week it recalled nearly 3,900 cars produced between launch in November last year and April of this year.

On Tuesday, investors may seek guidance on whether Musk will stick to its goal of producing 200,000 Cybertrucks by 2025. Musk said the model will not generate positive cash flow until 2025.

In addition to these concerns, the automaker may also face other questions, such as the difficulty of mass-producing the newer 4680 battery. Tesla needs this type of battery for Cybertruck and hopes to deploy it to other models to reduce costs. However, just as Tesla began laying off workers last week and is expected to lay off more than 10% of its employees, Tesla's battery director Andrew Baglino (Andrew Baglino) also resigned last week.

Finally, Tesla may discuss (and may also be asked in the conference call after the earnings report) other major businesses, such as Tesla's recent announcement of more than 10% layoffs, and management's position on the upcoming June vote for new shareholders. These votes involved changes in Tesla's place of registration and whether to approve Musk's 2018 controversial salary plan, which was declared invalid by the Delaware court.

Editor/jayden