Wall Street expects Tesla to have its worst earnings report in seven years, and gross margin for the first quarter will hit its lowest level since the beginning of 2017. The Model 2 is likely to get the most attention on the call, but don't expect a satisfying answer.
Amid investors' concerns about the first quarter results,$Tesla (TSLA.US)$The stock price ushered in “seven consecutive declines.”
US stocks closed on Monday, and Tesla's stock price closed down 3.4% to $142.05, the seventh consecutive trading day of decline, while also hitting a new low since January 2023. Tesla's annual cumulative decline reached 43%, making it the second-worst constituent stock in the S&P 500 index.
Last week, Tesla cut prices in the US, China, and the entire European market, by as much as $2,000 for its best-selling Model Y SUV and entry-level Model 3 sedan. Tesla also cut the price of its advanced driver-assistance system “fully automated driving” (FSD) by one-third.
Meanwhile, Tesla announced the recall of 3,878 Cybertrucks electric pickup trucks in the US because there is a risk that the accelerator pedals of these vehicles will get stuck, which may cause safety issues.
Ahead of the recall notice and a new round of price cuts, Tesla had begun a difficult restructuring, announcing earlier last week that it would lay off more than 10% of its workforce, involving 14,000 employees. The layoffs are still ongoing. According to reports, there are still some employees who have received notice of dismissal in the past few days.
The negative events continued to unfold, increasing market concerns about Tesla's first-quarter earnings report. Tesla plans to announce its first-quarter earnings report and hold a financial conference call after the US stock market in the early hours of Wednesday morning Beijing time.
Will Tesla have the worst earnings in seven years?
The most obvious evidence of Tesla's first-quarter earnings deterioration is delivery data for the first quarter.
At the beginning of April, Tesla's automobile production and delivery report for the first quarter showed that Tesla's deliveries fell 8.5% year on year to about 386,800 vehicles, while the month-on-month drop was more than 20%, far lower than analysts' previous expectations of 449,000 vehicles, setting a new record for the biggest drop below expectations.
Disappointing delivery data, combined with a new round of price cuts, have put pressure on Tesla's profits, and analysts seem to agree on this.
Barclays analyst Dan Levy predicts Tesla's gross margin for the first quarter will hit its lowest level since the beginning of 2017. At the beginning of 2017, Tesla had just begun production of its first mass-market model, the Model 3.
According to HSBC statistics, analysts expect Tesla's revenue to fall 5.1% in the first quarter. This will be the first year-on-year decline in revenue since the COVID-19 pandemic affected operations in the second quarter of 2020.
Also, according to media surveys, analysts expect Tesla's profit per share of 0.48 US dollars for the first quarter and revenue of 20.94 billion US dollars. As a comparison, Tesla's revenue for the fourth quarter of 2023 was 25.17 billion US dollars, and revenue for the first quarter of 2023 was 23.3 billion US dollars.
Model 2 and Robotaxi will be the focus of the conference call
Bank of America analyst John Murphy wrote in a Monday report: “Since the end of 2022, investors' sentiment towards Tesla has deteriorated.” He expects investors to “pay close attention to comments related to growth plans,” particularly the next-generation electric car Model 2 and the robo-taxi Robotaxi.
On April 5, the media reported that Tesla had abandoned plans to develop the low-cost model Model 2 and switched its focus to developing Robotaxi. Musk quickly denied it, calling it untrue, but later announced that Robotaxi would be officially released on August 8.
Levy said Model 2 is likely to get the most attention, but don't expect a satisfying answer.
Musk has said that without autonomous driving, Tesla is “basically worth zero dollars.” At tomorrow's conference call, he needs to explain and prove to investors that it is shifting to prioritizing the development of Robotaxi. It is not only a way to fool investors, but in the haze of declining profit margins, Robotaxi can bring new light and hope to the company.
He expects Tesla's free cash flow to be “moderately negative” in the first quarter, which will be the first negative free cash flow since the beginning of 2020.
UBS analyst Joseph Spak wrote in Monday's report that investors should “expect some small sparks” to appear on the call. He added that Tesla's gross profit margin for cars (excluding environmental subsidies) and free cash flow will be key indicators.
Spak also believes that there is a possibility that free cash flow will turn negative in the first quarter. He said that cash flow has become more important to Tesla because the current environment does not allow Tesla to launch Robotaxi and Model 2 at the same time.
Tesla falls and bears are fed up
At a time when Tesla's stock price plummeted, big bears ushered in “spring.”
According to S3 Partners data, as of Monday morning, Tesla's short position was about 111 million shares, accounting for 4% of the shares in circulation, with a nominal value of 16.3 billion US dollars.
Since this year, traders who have shorted Tesla have earned about 9.4 billion US dollars, making it the most profitable short position in the US market, far surpassing Apple's 3 billion US dollars.
Editor/Somer