TESLA BIG SCAM OR BIG PROFIT IN 2024?

Tesla (TSLA) stock has slumped in 2024, after doubling last year, and has dropped around another 10% since the EV giant reported worse-than-expected fourth-quarter earnings and revenue on Jan. 24.

With 2023 in the rearview mirror, analyst consensus now has 2024 Tesla earnings below 2023's level, signaling another year of negative growth for this growth stock.

Wall Street expects Tesla earnings per share of just $3.07 a share in 2024, according to FactSet. That would be a 1% decline vs. last year's $3.12. That was a 23% decline vs. 2022. Analyst project a solid increase in 2025 to $4.24 a share. However, Wall Street has slashed projections from $5.27 at the end of last year and $6.90 at the end of February 2023. Meanwhile, actual Tesla earnings peaked in 2022 at $4.07 a share.

On Feb. 7, Gary Black, the managing partner of the Future Fund, posted on X that with Tesla slipping to ninth in market capitalization, "investors increasingly view TSLA as no longer part of the Magnificent 7."

"I find this sad, since TSLA being part of the Mag 7 was viewed as being at the top of the innovation food chain, the most glamorous of the growth stocks, America's finest," Black wrote.

So far in 2024, Tesla stock has retreated nearly 26%, falling below key levels of support, as the EV giant appears headed for a difficult year after CEO Elon Musk offered a tempered outlook with few specifics on Jan. 24.

However, as analysts await news on auto gross profit margins, excluding regulatory credits, and whether vehicle pricing will stabilize, the top question for investors is always, when is it a good time to buy or sell Tesla stock.

Tesla Stock: Q4 Earnings

Wall Street slashed 2024 profit projections after Tesla reported worse-than-expected fourth-quarter earnings and revenue in late January, with longtime Tesla bull Dan Ives summing up the conference call as a "train wreck."

Tesla reported that Q4 earnings fell 40% to 71 cents per share. Meanwhile, quarterly revenue totaled $25.17 billion, up 3.5% vs. Q4 2022. Tesla's gross profit margin came in at 17.6%, down 612 basis points. For 2023, Tesla EPS fell 23% to $3.12 while revenue increased 19% to $96.77 billion.

In 2024, Tesla's "vehicle volume growth rate may be notably lower than the growth rate achieved in 2023 "as our teams work on the launch of the next-generation vehicle at Gigafactory Texas," according to the company.

Tesla said it is also "currently between two major growth waves," with the "global expansion" of the Model 3 and Model Y vehicle platform "and the next one we believe will be initiated by the global expansion of the next-generation vehicle platform."

"There's lots to look forward to in 2024," Musk said on the earnings call. He added that Tesla is focused on ensuring that its next-generation vehicle, energy storage, full self driving and "other projects" are "executed as well as possible."

However, without any specifics and no word on its vehicle price cutting strategy or what way profit margins are expected to go in 2024, Wall Street has cut profit expectations. Many Tesla bulls have also turned bearish on the short-term outlook for TSLA.

Tesla Stock No Longer A 'Best Idea'

Wedbush Securities removed Tesla stock from its list of "best ideas" for 2024 following earnings as Ives outlined a number of items Tesla and CEO Elon Musk must address for TSLA to recover.

Wedbush analyst Ives said that TSLA will remain off the firm's list of best ideas until there is evidence that Musk and the company takes up their suggestions.

Ives wrote a list of 10 items for "Musk to turn Tesla around." The firm's asks include Tesla to announce a $10 billion share buyback program, to create a holding structure for AI initiatives and give Musk more control, stop vehicle price cuts to maintain margin leverage over other automakers, get assurance Musk will not do more TSLA stock sales to fund X, and to give a "hittable" production and delivery timeline for Model 2 and sub $30k vehicle in 2025.

Ives, who has been one of the most bullish supporters of Tesla, cut his Tesla price target to 315, down from 350.

Analysts Voice Tesla Concerns

"We were dead wrong expecting Musk and team to step up like adults in the room on the call and give a strategic and financial overview of the ongoing price cuts, margin structure and fluctuating demand," Ives wrote.

Meanwhile, Morgan Stanley analyst Adam Jonas, another Tesla bull, wrote that the 2024 outlook was the "least detailed we remember." He added that Tesla profitability could drop toward the $2 per share level.

"Investors and analysts are very much 'on their own' when it comes to the FY2024 revenue and growth outlook," Jonas wrote.

Bernstein analyst Toni Sacconaghi noted in late January that 2024 will be a challenging year for Tesla and that it is becoming "increasingly apparent that 2025 will likely not be better."

Q4 Earnings Overshadow Record Deliveries

The company delivered 461,538 Model 3/Y vehicles in Q4 and 22,969 "other models." Tesla currently produces the Model 3, Model Y, Model S, Model X and Cybertruck.

Tesla's previous quarterly delivery record was in Q2 with 466,140. In Q3, TSLA delivered 435,059 units.

Tesla had been aiming to deliver 1.8 million vehicles in 2023. Ahead of Tesla's data release, Wall Street consensus had Tesla vehicle deliveries in 2023 totaling 1.797 million, just below that 1.8 million target, according to FactSet.

Cybertruck Event

The pessimism at the end of 2023 followed the excitement surrounding the Nov. 30 Cybertruck event.

Tesla delivered 12 Cybertrucks at its Austin, Texas, factory with pomp and circumstance.

"We have a car here that experts said was impossible, that experts said would never be made," Chief Executive Elon Musk told the crowd.

The EV giant is offering three trims of the Cybertruck, with the rear-wheel drive version starting at $60,990 with a 250 mile range. The base model will be available in 2025, according to Tesla's website.

The all-wheel drive version has a starting price of $79,990 with 340 miles of range. Tesla is also offering a top end trim, called the Cyberbeast, starting at $99,990 with a 320 mile range. Both the all-wheel drive version and the Cyberbeast have 2024 deliveries.

Four years ago, Tesla announced the price would start at $39,900.

Tesla Stock Falls Amid Growth Concerns

TSLA shares sank after the company announced worse-than-expected Q3 earnings and revenue on October 18, 2023. Tesla reported third-quarter earnings down 37% to 66 cents per share, the lowest in two years for Chief Executive Elon Musk.

Meanwhile, quarterly revenue increased 9% to $23.35 billion. Tesla's auto gross profit margins, excluding regulatory credits, fell to 16.3%. Auto gross margins came in at 18.1% in Q2, down from 19% in Q1. That is below the 20% gross margin "floor" Tesla previously targeted.

Elon Musk on the earnings call also preached caution, offering investors warnings about the Cybertruck and the broader economy. The following day, Tesla stock fell 9.3%.

Musk said it will take 12-18 months before the Cybertruck is a "significant positive cash flow contributor." He added there will be "enormous challenges" in reaching volume production.

Musk has said Tesla will end up producing around 250,000 Cybertruck units per year, reaching that output sometime in 2025.

Tesla Stock And Musk

There is never a dull moment for Tesla and Musk, with the two inextricably linked. After Musk took over Twitter on Oct. 28, 2022 purchasing the social media platform for $44 billion, some longtime Tesla stock bulls worried Musk's focus on Twitter, along with negative attention, would weigh down Tesla stock.

Musk appeared to lessen those fears when he hired Linda Yaccarino, NBCUniversal's advertising chief, as the new CEO for X Corp., formerly known as Twitter. The Tesla chief added Yaccarino will focus on business operations while he will work on product design and new technology.

At the time, Wedbush analyst Dan Ives wrote the news ends some of the "distraction risk around the Tesla story."

However, Tesla stock cut back below a key technical level early on Nov. 16, following a four-day, almost 18% rally. The pullback also came after comments made on X by Chief Executive Elon Musk in support of an antisemitic post.

Meanwhile, Elon Musk on Jan. 15 posted on X that he feels he needs more TSLA shares and voting power before making the EV giant an AI and robotics leader.

Musk wrote that he's "uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control." The chief executive added that he wants enough shares to be "influential but not so much that I can't be overturned."

On Feb. 3, the Wall Street Journal reported that some Tesla board members felt pressure to do drugs with Elon Musk. The in-depth report said some friends have urged him to go to rehab, and highlighted concerns that the board is not sufficiently independent from Musk.

Tesla's Global Price Cutting Strategy

To maintain sales momentum in 2023, Tesla aggressively cut vehicle prices and offered discounts throughout the year. Auto gross margins, which peaked at 30% in Q4 2021 amid industry chip shortages, have plunged well below 20%.

Tesla has continued cutting prices early in 2024, deciding in January to trim China vehicle prices on the Model 3 and two Model Y variants and slashing Model Y prices in many European countries.

On Feb. 4, the EV giant raised the U.S. price of its Model 3 Long Range variant. The Model 3 LR price is now $46,990, an increase of $1,000. Tesla kept the U.S. price of its Rear-Wheel Drive version at $38,990.

The price hike may reflect strong demand for the upgraded "Highland" Model 3 or simply limited supply. Model 3 production is down significantly in the first quarter as the Fremont plant switched over to the Highland model.

Tesla Vehicle Price Inversion

Tesla's latest move further inverts prices between the Model 3 and Model Y, with the latter traditionally more expensive.

The Model Y RWD is $43,990, with the Long Range variant $48,990 and the Performance variant is $52,490. But the Model Y is eligible for the IRA tax credit of $7,500, so customers actually pay $36,490, $41,490 or $44,990 for the Model Y.

Tesla on Feb. 4 also allowed a free transfer of Full Self-Driving (FSD) in North America for FSD owners who take delivery of new eligible EVs by March 31.

On Jan 17, Gary Black posted on X that based on the January price cuts he was revising 2024 earnings estimates to $3.75 per share, down from $3.90 per share.

Black added that Tesla management "still does not see that cutting configurator prices and inventory discounts by the same amount is value destructive."

Hertz Signals Waning EV Demand?

On Jan. 11, Tesla stock traded below its 200-day moving average for the first since late November as Hertz (HTZ) announced it is selling about one-third of its EV fleet and that it predicts $245 million of incremental depreciation expenses related to the sale in the fourth quarter.

Hertz reported it will sell around 20,000 electric vehicles and that it expects to reinvest a portion of the proceeds from the sales into the purchase of internal combustion engine (ICE) vehicles to meet customer demand. In 2021, Hertz ordered 100,000 Tesla vehicles, with the goal to convert around 20% of its global fleet to EVs.