'Approaching maximum market negativity on EVs?' Here's what Wall Street expects from Tesla's 4th-quarter earnings report
Reuters/Stephen Lam
- Tesla will report fourth-quarter earnings results on Wednesday after the closing bell.
- Investors are looking for signs the carmaker can keep up its stunning momentum from 2023.
- Tesla's profit margins will also be in focus, especially as EV demand looks poised to soften.
Investors have their eye on Tesla as they wait for the carmaker to report fourth-quarter earnings after the closing bell on Wednesday.
The results will be a key input for investors, who are charting the trajectory of the company after a stunning 2023. Tesla's stock more than doubled last year as price cuts on some of its car models paid off in helping drive sales, while Wall Street investors rushed to dump their cash into AI-related stocks.
Tesla also blew through expectations for its deliveries and production. The company produced 430,488 units and delivered a record 435,059 units last quarter.
Investors will be looking for signs Tesla can keep up that momentum into the coming year, such as by maintaining its profit margins and its share of the EV space. They're also watching for any indication Tesla will roll out any highly-anticipated products over the next year, like its mass-market car, or its full self-driving technology.
- Revenue: $25.87 billion
- Adjusted earnings per share: $0.78
- Gross margins: 18.05%
Here's what Wall Street analysts are saying about the EV maker's upcoming third-quarter earnings report.
Morgan Stanley
The investment bank warned of an imbalance of EV supply and demand which could weigh on Tesla this year. Though the world's supply of EVs is on the rise, demand looks to be weakening, analysts warned, pointing to indicators like Tesla's price cuts in China, fewer vehicles qualifying for tax incentives, and rental giants, like Hertz, cutting their supply of Teslas.
"Looking ahead, are we approaching maximum market negativity on EVs? We believe the trough may happen towards the latter part of 2024," the bank said in a note, citing influences stemming from the EU Parliamentary and US presidential elections.
Analysts are bullish on Tesla's artificial intelligence and robotics projects, but they note that Musk's recent threat to move AI projects outside of the company could challenge their thesis.
"Tough sledding for EVs but we remain OW on AI robotics optionality," the bank added.
Morgan Stanley reiterated its "Overweight" rating but slashed its price target from $380 to $345 a share, representing potential upside of 65%.
Goldman Sachs
Tesla's growth potential over the long-term is promising, but the company faces key risks in the short-term, Goldman Sachs warned.
"Key downsides to our view relate to potentially larger vehicle price reductions than we expect, increased competition in EVs, delays with products/capabilities like FSD/the third generation platform," strategists said.
The bank also cited Tesla's "internal control environment," profit margins, and its "high degree of vertical integration" as key risks.
Goldman Sachs reiterated its "Neutral" rating and its $235 price target, representing potential upside of 13%.
Wedbush Securities
Electric vehicle demand is bound to soften over the next year. Tesla will have to choose whether it will continue to slash the prices of its cars to remain competitive, or keep its prices stable in 2024, Wedbush analysts said.
"Which pricing path Tesla takes will be foundational move for the future of Tesla over the coming years in our view. This will be key focus for the Street tomorrow night to gauge what Tesla anticipates for 2024 around consumer demand globally," the firm said in a note.
Wedbush maintained its "Outperform" rating and its $350 price target, representing potential upside of 68%.
CFRA Research
Tesla still has long-term growth potential, according to CFRA senior stock analyst Garrett Nelson, pointing to the company's rising pace of production and deliveries. Last year, deliveries surged 38% and production rose 35% to notch 1.8 million units.
A softer EV market this year means Tesla could see some of its smaller rivals suffer. Traditional carmakers are also set to scale back their growth plans in the EV space, potentially reducing the competition for Tesla.
"We view the upcoming release as positive and remain bullish on Tesla even after the stock's stellar performance in 2023, expecting the company to benefit from declining unit costs (particularly plummeting battery costs) and introduce its long-promised mass market EV model later this year," the firm said.
CFRA reiterated its "Buy" rating and its $300 price target, representing potential upside of 44%.
Deepwater Asset Management
All eyes will be on Tesla's profit margins into the new year, according to Deepwater.
"For Tesla earnings it's all about the margins. While I expect a slight improvement over the quarter, I believe the outlook for margins in 2024 will be for stabilization, not expansion," strategists said.
But the company is likely to maintain its share of the EV market this year — and growth is bound to scale over the next few years.
Profit margins could rise back above 20% by 2025. Meanwhile, deliveries could surge from an expected 17% growth this quarter to post 24% growth in that timeframe, strategists estimated.