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Tesla’s (TSLA) stock plunge extended into March following February’s 28% decline — the steepest monthly drop since December 2022. The EV maker’s shares have continued to fall in March, pushing its market cap below $900 billion despite CEO Elon Musk's bold claim that a "1,000% gain for Tesla in five years is possible" with "outstanding execution."
Tesla’s Q4 results revealed troubling trends, with automotive revenue declining 8% year-over-year and operating income dropping 23%. Tesla also cited reduced vehicle pricing as a key factor in this performance downturn. Additional challenges include President Trump's new tariffs on goods from Canada and Mexico, where several key Tesla suppliers are based.
Further, Musk's growing political profile as head of the Department of Government Efficiency (DOGE) appears to be affecting Tesla's reputation, particularly in Europe, where vehicle registrations have declined sharply—plummeting approximately 60% in Germany this January compared to last year.
Will Investors Sell the Robotaxi News?
According to a CNBC report, Barclays analyst Dan Levy attributes the sell-off to several factors, including "an unwind of the powerful run" following the U.S. elections, which he describes as reflecting "sharp euphoria and technical factors—with fundamentals largely dismissed." Levy does not expect improvement in the near term, labeling Tesla's short-term catalyst path as "limited" while anticipating "soft" first-quarter results.
While Levy expects Tesla’s margins to remain under pressure, he is optimistic about the launch of the Robotaxi in June 2025, which could be a key catalyst for the EV stock - even as the analyst warned, “We could see interest building into the event, with a ‘sell the news’ reaction on the event.”
A Challenging Year for Tesla in Q4
Tesla delivered mixed financial results for 2024, posting $7.1 billion in operating income. Its operating income in Q4 stood at $1.6 billion, while net income reached $2.3 billion, bolstered by a $600 million mark-to-market gain on digital assets.
While Q4 revenue rose 2% year-over-year to $25.7 billion, operating income fell 23% to $1.6 billion, indicating an operating margin of 6.2%. This drop was mainly due to lower average selling prices for vehicles, although it was partially offset by growth in energy storage, services, and reduced per-vehicle costs.
Despite recent macro challenges, Tesla ended 2024 with several notable achievements. The fourth quarter marked record vehicle deliveries and energy storage deployments, with the company expecting Model Y to maintain its position as the world's best-selling vehicle for 2025. The newly refreshed Model Y has now launched in all markets globally.
Affordability remains a central focus for Tesla as it navigates a competitive EV landscape. It made significant progress in reducing manufacturing costs, with the cost of goods sold (COGS) per vehicle reaching its lowest level ever at under $35,000 in Q4 of 2024. This improvement was primarily driven by raw material cost reductions, helping offset investments in financing and lease options for customers.
Tesla's Energy business achieved a record performance in Q4 with its highest-ever gross profit. The completion of Megafactory Shanghai in December marks a significant expansion of Tesla's energy storage capabilities, with production ramping up this quarter.
All Eyes on FSD
Looking ahead, Tesla describes 2025 as a "seminal year" in the company's history, with Full Self-Driving (Supervised) capabilities continuing to improve rapidly. Tesla aims to exceed human safety levels, eventually unlocking unsupervised FSD options and launching its Robotaxi business in parts of the U.S. later this year. Tesla is also working to bring FSD to Europe and China in 2025.
Tesla’s cash position remains strong, with an operating cash flow of $14.9 billion for 2024 and a free cash flow of $3.6 billion. Tesla increased its cash and investments by $7.5 billion, ending the year with $36.6 billion, providing substantial liquidity to fund its product roadmap and expansion plans.
Out of 40 analysts covering Tesla stock, 13 recommend “Strong Buy,” three recommend “Moderate Buy,” 14 recommend “Hold,” and 10 recommend “Strong Sell.” The average target price for TSLA stock is $348.61, indicating an upside potential of roughly 25% from current levels.
