Tesla (TSLA) is expected to report results on its fiscal first quarter on Tuesday, April 23, with a conference call scheduled for 5:30 pm EDT. What to watch for:
MOMENT OF TRUTH HAS ARRIVED: Wedbush says “the moment of truth has now arrived” for Elon Musk and Tesla with this earnings call being “one of the most important moments in the company’s history.” For the first time, “many long time Tesla believers are giving up on the story and throwing in the white towel,” the firm tells investors in a research note. Wedbush says the miscalculation of demand erosion in China has “been a gut punch to the bull thesis,” while the Model 2 versus Robotaxi debate “has taken on a life of its own.”Wedbush notes that while it and the Street are expecting a “rip the band-aid off quarter and a softer outlook,” Musk needs to do five things on the conference call to start to change the narrative in the Tesla story: reverse the negative growth trend in China, give realistic guidance for the Street for 2024, come out with the Model 2 in the next 12 to 18 months, address artificial intelligence initiatives at Tesla and the 25% ownership comment from a few months ago, and announce an AI day. “The clock has struck midnight for Musk to lay out the strategic plan for the future,” contends the firm, which keeps an Overweight rating on Tesla with a $300 price target.
THESIS-CHANGING SHIFT: Deutsche Bank downgraded Tesla to Hold from Buy with a price target of $123, down from $189. The firm cites the “high likelihood” of Model 2 push-out and the company’s change of strategic priority to Robotaxi for the downgrade. Deutsche’s Buy rating was predicated on Tesla’s next-generation vehicle priced at $25,000 coming late next year, which would allow the company to reaccelerate volume, margins and free cash flow, and potentially come to dominate the Western electric vehicle market. However, pushing out the Model 2 will create “significant” earnings and free cash flow pressure on 2026 and beyond estimates, and make the future of the company tied to Tesla “cracking the code on full driverless autonomy,” which represents a “significant technological, regulatory and operational challenge,” says the firm.Deutsche views Tesla’s shift to Robotaxi as “thesis-changing,” and worries the stock will need to undergo a “potentially painful transition in ownership base,” with investors previously focused on electric vehicle volumes and cost advantages potentially “throwing in the towel, and eventually replaced by AI/tech investors with considerably longer time horizon.”
FUTURE GROWTH DRIVERS: In a pre-earnings research note, BofA points out that Tesla’s stock has been under material pressure since the beginning of 2024, especially on a relative basis. This is due to both weaker EV fundamentals and investor sentiment around the electrification theme. However, these headwinds are well-known, and appear to be priced into the stock, the firm argues. BofA retains some level of skepticism on Tesla’s growth prospects but also sees opportunities as the company unveils future growth drivers in the coming months, which alone may be enough to support the stock. Therefore, the firm maintains its Neutral rating.
TESLA CUTS PRICES: Tesla slashed the price of its Full Self-Driving, or FSD, driver assistant software to $8,000 from $12,000 in the United States, as CEO Elon Musk doubles down on self-driving technology, Reuters reports. According to the Tesla website, customers can now pay $8,000 for the FSD feature, or subscribe to use it for $99 a month.Additionally, the EV maker has cut prices in a number of its major markets – including in China and Germany – after price cuts in the United States – as it grapples with falling sales and an intensifying price war for electric vehicles, especially against cheaper Chinese EVs, Reuters’ Hyunjoo Jin, Ethan Wang, and Christoph Steitz report. The swathe of price cuts comes after Elon Musk’s EV maker reported this month that its global vehicle deliveries in the first quarter fell for the first time in nearly four years.Commenting on the price cuts, Piper Sandler said they are “a clear indicator that Tesla’s production capacity has outstripped demand.” In the firm’s view, a coincident price cut on full self-driving software from $12,000 to $8,000 is “even more material to Tesla’s earnings potential,” the analyst tells investors. Tesla reports earnings on Tuesday, “so for now, we’ll refrain from updating our model to reflect the price cuts,” added the firm, which has an Overweight rating and $205 price target on Tesla shares.More By This Author:Here’s What Wall St. Experts Are Saying About These Automakers Ahead Of Earnings
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