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Tesla results: Shares fall ahead of results as analysts revise down estimates

EV deliveries have fallen short of expectations
EV deliveries have fallen short of expectations Copyright Michael Macor/San Francisco Chronicle
Copyright Michael Macor/San Francisco Chronicle
By Tina Teng
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Tesla's shares have seen a fall of nearly 30% in the first quarter because of growth bottlenecks. As analysts revise down estimates of Q1 earnings, an upside surprise may present a chance to rebound. Conversely, a miss on the expectation may exacerbate the downward pressure.

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Tesla has endured a harsh selloff in the first quarter, with shares plummeting by nearly 30% as the EV maker grappled with growth bottlenecks amid fierce competition from Chinese rivals and diminished consumer demand. 

Price cuts implemented in the second half of 2023 have notably compressed its profit margin, coupled with a marked deceleration in revenue growth due to weakened consumer demand. Below is a glimpse into Tesla's forthcoming fiscal 2024 first-quarter earnings, exploring its prospective growth trajectory and potential share price movements in light of the outcome.

Tesla's Q1 EV deliveries fall short of expectations

Tesla reported a disappointing delivery figure for the first quarter, totalling 368,810, marking an 8.5% decrease compared with the same quarter last year and a sequential drop of 20%. Production also experienced a slowdown, decreasing by 12.5% from the previous quarter to 433,371 units. Tesla attributed this deceleration to two main factors: the temporary closure of the German factory following a power outage caused by arson in early March and shipment disruptions due to attacks by the Houthi militia.

In January, the company indicated that it was in a transitional phase "between two major growth waves" due to the ramped-up production of the Cybertruck, which was launched in December 2023. Tesla had announced its intention to manufacture lower-cost electric vehicles, but according to Reuters, the plan was scrapped a week ago.

A heating up Chinese EV competition

Tesla also faced challenges of weakened Chinese demands in China, where sales contribute to approximately 22% of the EV maker's total revenue. Furthermore, intense competition from Chinese rivals has eroded some of Tesla's market share, notably BYD, whose delivery figures surpassed Tesla's in the final quarter of 2023. However, BYD experienced a significant decline in sales, relinquishing its lead to Tesla in the first quarter of 2024. Adding to the competitive landscape, Chinese phone maker Xiaomi has recently entered the market with its sporty electric vehicles, priced lower than Tesla's Model 3 in China. Xiaomi's entry is perceived as another threat to Tesla's position in the Chinese market.

Earnings review for FY2023 Q4

In the final quarter of 2023, Tesla's overall revenue only grew by 3% from a year ago as its automotive sales barely increased, up by 1% annually. The operating margin came in at 8.2%, nearly halved from 16% in the fourth quarter of 2022. Tesla's net income more than doubled, thanks to a provision of $5.9 billion one-time non cash tax benefit. But excluding the amount, its earnings per share fell by about 39% year over year to $0.71. CEO Elon Musk also provided weak guidance and said the volume growth could be notably lower for 2024.

Nonetheless, Tesla delivered a record number of electric vehicles of about 1.8 million in 2023, up 38% from 2022. Revenue for the full year rose 15% to $82.42 billion. Notably, its energy storage deployment grew significantly last year, up 125% compared to 2022. But the sector only accounts for more than 6% of Tesla’s overall revenue.

Cybertruck ambitions

It looks like Cybertruck has emerged as Tesla's bottom line growth this year, as indicated in its earnings report for Q4 2023. The company stated that it had the capacity to produce more than 125, 000 vehicles annually. CEO Elon Musk expected to deliver "somewhere on the order of a quarter-million units a year". However, he did not confirm if this could be achieved in 2024 as the production could take longer time than other models "given its manufacturing complexity".

The forecasts for Q1 2024

There is a range of forecasts for Tesla's first-quarter earnings from various financial institutions. However, all projections indicate a further deceleration in Tesla's revenue growth and net income. According to Yahoo Finance, the EV maker's first-quarter revenue will be around $0.55, which may lead to a 34% drop compared with the same quarter of 2023. The revenue estimate is about $23.13 billion, representing a flat growth year over year.

Tesla's shares stabilise

Despite negative news, Tesla's share prices saw a rebound after a sharp decline when it reported the disappointing delivery number early in the month. This may suggest that investors may have digested the slowdown growth of Tesla's sales. And the expectations for the first quarter earnings have been downgraded, which may provide an opportunity for an upside surprise for the company. But the guidance for the current quarter will be crucial to driving its share price.

From a technical perspective, Tesla's potential price support could be around the year-low level of $160. A breakdown below this level would likely lead to further declines in the share price, Conversely, a positive result and strong guidance could fuel a further rebound towards its February high of $200.

Telsa is set to announce its earnings for the first quarter of 2024 after the bell on Tuesday, 23 April.

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