Tesla stock is angling lower, falling around 30% so far this year, but shares have rallied back following the EV giant's first-quarter earnings and revenue report on April 23. However, uncertainty remains with the June 13 annual meeting upcoming and Chief Executive Elon Musk appearing set on restructuring the company for the "next" growth phase.
Tesla reported worse-than-expected first-quarter earnings and revenue late on April 23. Investors appeared not to care, sending TSLA shares jumping 12% the following day after Musk signaled "more affordable" new models are on the way. Musk also predicted 2024 vehicle deliveries would be higher, stressing Tesla's focus on full-self driving (FSD) during the earnings call.
Ahead of first-quarter earnings , TSLA shares had fallen more than 17% in April, hitting a 52-week low of 138.80 on April 22. Investor sentiment seemed downcast. However, Tesla stock began rallying immediately following Q1 results. As of May 23, Tesla stock is up around 21% since Q1 earnings.
With Musk focused on FSD and artificial intelligence, he is also shaking up Tesla, letting top executives go and announcing layoffs.
Adam Jonas, Morgan Stanley's high-profile autos analyst and a Tesla bull, wrote on May 2 that Tesla is in the "midst of the most profound realignment of priorities and strategy in the company's history."
Jonas has added that "Tesla leadership has a history of upping up the intensity when its back is against the wall."
"Investors should expect a volatile tape as the company enters an 'unfamiliar' phase in its strategic lifecycle," Jonas wrote recently.
As analysts await updates around Tesla's strategy, new products and EV demand, the top question for investors is always, when is it a good time to buy or sell Tesla stock.
Jensen Huang Touts Tesla
Nvidia Chief Executive Jensen Huang talked up Tesla's autonomous driving efforts on Wednesday, claiming the EV giant is "far ahead" on self-driving vehicles and that all cars will eventually have autonomous abilities.
"Tesla is far ahead in self-driving cars but every single car someday will have to have autonomous capability," Huang told Yahoo Finance Wednesday night. "It's safer, more convenient, it's more fun to drive."
Tesla along with Elon Musk are major customers of Nvidia.
Nvidia on its earnings call Wednesday mentioned myriad automotive customers working on AI self-driving, including several China EV players.
Nvidia reported that revenue from automotive was $329 million, up 17% sequentially and up 11% year-on-year. The company added that this increase was primarily due to its "self-driving platforms."
Chief Financial Officer Colette Kress said on the earnings call Wednesday that Nvidia "supported" Xiaomi to launch its first electric vehicle, the SU7 sedan, which is posing a serious threat to the Tesla Model 3 in China.
Kress added that its updated AI car computer software, Nvidia Drive Thor, is slated for production in vehicles in 2025. Customers include BYD, XPeng and others.
"We expect automotive to be our largest enterprise vertical within data center this year," Kress said Wednesday.
Tesla Vote: The Annual Shareholder Meeting Upcoming
Shareholders are currently voting in the run-up to the June 13 annual meeting as everyone awaits the result to see if Musk's 2018 $56 billion compensation package will be reapproved or not.
Since Tesla on April 17 requested shareholders ratify Musk's 2018 pay package despite a Delaware court voiding the plan earlier this year, the EV giant has been attempting to drum up votes of its retail investor base. Musk's compensation deal is currently valued at around $46 billion.
The vote comes after a Delaware judge ruled against the 2018 package, deciding that the package was excessive and unfair to Tesla investors. The judge criticized Musk's "extensive ties" with Tesla board members.
Tesla shareholders are also voting on whether to move Tesla from Delaware to Texas. The EV giant has been incorporated in Delaware since 2003.
Tesla Vote: Long-Term Direction Implications
Voting has been open for the past few weeks. The Tesla board has recommended "yes" votes on both reincorporating in Texas and Musk's pay.
The vote on Musk's compensation requires a simple majority of votes, excluding those owned by Musk and his brother, Kimbal Musk. Meanwhile, the vote to reincorporate Tesla in Texas necessitates a majority of all shares outstanding, with any uncast votes counted as "no."
All Tesla stockholders can vote in Tesla's annual meeting with a deadline of 11:59 p.m. Eastern Standard Time on June 12. Registered stockholders may also vote at the virtual annual meeting.
Jonas on Monday wrote that "as investors question if the CEO's commitment is less or more, we believe Elon needs Tesla more than ever before."
"We would encourage investors to pay close attention to the June 13th shareholder vote," Jonas said. "While impossible to predict the outcome, we expect the event could drive material volatility in the stock."
This comes after Jonas said on May 10 that the Tesla shareholder vote is significant to the "long-term strategic direction of the company."
Elon Musk, Layoffs And Superchargers
Meanwhile, Musk has decided to let two top executives go while also cutting the EV company's entire supercharger team, according to reports on April 30. However, since then he appears to have since started hiring back supercharger employees.
Musk took to the social media platform X in recent weeks claiming that Tesla will spend more than $500 million to expand its supercharger network and "create thousands" of new chargers in 2024.
"That's just on new sites and expansions, not counting operations costs, which are much higher," Musk said.
In the first quarter, Tesla supercharger stations totaled 6,249, up 26% vs. Q1 2023. Compared to Q4, supercharger stations grew 5%, adding 297. Meanwhile, supercharger connectors increased 27% to 57,579 in Q1, with 2,687 additional connectors compared to the fourth quarter.
In late April, Musk dismissed Rebecca Tinucci, senior director of Tesla's supercharger efforts, and Daniel Ho, head of the new vehicles program. The Tesla CEO also reportedly cut teams under Tinucci and Ho along with laying off its public policy employees and the entire staff working on Tesla superchargers.
Musk decided in April to lay off more than 10% of Tesla's global workforce, an effort to prepare for the "next phase of growth." Drew Baglino, who served as senior vice president of powertrain and energy, and Rohan Patel, vice president of public policy and business development, both departed Tesla around the time of those cuts.
Tesla Stock Declines In 2024
So far in 2024, Tesla stock has retreated about 30%, but has recently reclaimed its 10-week line and 50-day moving average. With 2023 in the rearview mirror, Wall Street consensus has 2024 Tesla earnings firmly below last year's level.
That signals another year of earnings declines for this growth stock. Analysts currently expect Tesla earnings per share of just $2.43 in 2024, according to FactSet. That would be a 22% decline vs. $3.12 in 2023.
Wall Street's 2024 EPS consensus estimates for Tesla have come down 36% since the end of 2023. Looking further out, analyst consensus has Tesla's EPS in 2025 coming in at $3.31, down from the $5.29 projection at the end of 2023, according to FactSet.
Tesla Stock: Q1 Earnings
Tesla reported its lowest quarterly EPS since 2021 on April 23. Q1 earnings fell 47% to 45 cents per share. Meanwhile, quarterly revenue totaled $21.3 billion, down 9% vs. Q1 2023. Analysts projected Q1 earnings falling more than 42% to 49 cents per share with sales declining nearly 5% to $22.22 billion.
The EV giant said its Q1 revenue decline was primarily due to a reduced average vehicle selling price and a drop in vehicle deliveries. Tesla added revenue was also hindered by issues with the Model 3 refresh rollout at its Fremont factory.
Total gross margins came in at 17.4%, down 199 basis points compared to Q1 2023. Meanwhile, Tesla ended the first quarter with a global vehicle inventory of 28 days, up 87% compared to Q1 2023.
Low Cost Vehicles Upcoming?
Going into earnings, there were reports Tesla had scrapped, or sidelined, plans to produce its next-generation Model 2, a $25,000 vehicle.
However, Tesla reported that it had updated its "future vehicle lineup to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025."
These new vehicles include "more affordable models," according to Tesla and will "utilize aspects of the next generation platform as well as aspects of our current platforms." Tesla said it could produce these new vehicles on the same manufacturing lines as its current vehicle lineup.
Musk added on the earnings call that the new model line will come early in 2025 "if not late this year."
Executives refused to go into further detail about the company's low-cost vehicle plans.
Wedbush Securities analyst Dan Ives, a longtime Tesla bull, wrote it appears that Tesla is going with a "Model 2.5" instead of a Model 2.
"While it's not a next generation Model 2 platform, we believe this is the right strategy and move at the right time," Ives said following earnings.
Tesla Stock: Musk Predicts Higher 2024 Vehicle Deliveries
Musk added on the earnings call that he expects 2024 vehicle deliveries to grow compared to 2023. The EV giant saw deliveries in 2023 hit a record 1.81 million. However, EV demand appears to be slowing this year.
Tesla reported in early April that global first-quarter deliveries totaled 386,810 while it produced 433,371 vehicles. The deliveries included a combined 369,783 Model 3 and Model Y units along with 17,027 "other" vehicles.
Tesla's 386,810 deliveries tally in Q1 undercut even the lowest estimates and marks the lowest quarterly deliveries since 344,000 in Q2 2022. Since then, analysts have been revising lower delivery estimates.
"Apart from further price cuts we believe full-year sales growth may require help from the market as well as seamless execution on cheaper new model introductions," Morgan Stanley analyst Adam Jonas wrote Wednesday.
Meanwhile, Tesla ended the first quarter with a global vehicle inventory of 28 days, up 87% compared to Q1 2023. Auto gross profit margins, excluding regulatory credits, came in at 16.4%, above expectations of 15.9%.
"We think Q2 will be a lot better," Musk said on the earnings call.
Next-Generation Platform, The Robotaxi And Ride Share
Musk and Tesla have been stepping up rhetoric about full self-driving and AI in recent weeks. That messaging was on full display during the company's first-quarter earnings call.
Tesla recently recast full self-driving from FSD Beta to supervised FSD. The EV giant reported it would recognize deferred revenue of $281 million by the end of Q1, according to regulatory filings.
"The way to think of Tesla is almost entirely in terms of solving autonomy and being able to turn on that autonomy for a gigantic fleet," Musk said on the earnings call.
He later added that "if somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company."
Tesla Stock: AI Gold Rush
On April 28, Musk doubled down on X, formerly Twitter, that Tesla will spend around $10 billion in 2024 in "combined training and inference AI, the latter being primarily in car."
"Any company not spending at this level, and doing so efficiently, cannot compete," Musk said.
The Tesla chief also confirmed on the Q1 earnings call that the company will be "showcasing" its robotaxi, or "cybercab," on Aug. 8 and that a low cost vehicle will be discussed more at that time.
Tesla's free cash flow also went negative to the tune of $2.5 billion in Q1, as Tesla spent $1 billion on "AI infrastructure."
The company also said it will "continue to increase" its AI infrastructure capacity in the "coming months" and that it is currently working on ride-hailing functionality that will be "available in the future."
This could potentially put Tesla in competition with Uber and Lyft.
Jonas believes Tesla's long-term goal is to offer autonomous ride-hailing vehicles. However, initially it will rely on "human-supervised FSD" from a combination of Tesla owners and a Tesla owned fleet, according to Jonas.
Tesla Momentum, Competition In China
Tesla ended 2023 on a high in China. However, the EV dynamic in China could quickly change. Musk has said China's EV companies are Tesla's main competition — with BYD, Nio, Li Auto and others all making inroads in the EV market.
BYD, already far above Tesla EV sales including plug-in hybrids (PHEVs), overtook its U.S. rival in global BEV deliveries in the fourth quarter of 2023. Warren Buffett-backed BYD has also decided to open a plant in Europe, moving onto Tesla's turf on another continent. BYD already is building plants in Thailand and Brazil.
However, Musk and Tesla appear to be changing it up. The EV giant has recently won tentative approval for introducing Full Self-Driving in China after Elon Musk made a surprise visit to the country at the end of April.
Wedbush analyst Ives wrote that Musk's visit to China was a "home run." Ives added that the Tesla chief's ability to win FSD approval in China is a "watershed moment for the Tesla story."
In Q1, Tesla sold 132,420 vehicles in China, about 34% of its global deliveries. Tesla also sold 89,064 China-made vehicles in March, including 26,666 exported, according to the China Passenger Car Association (CPCA).
BYD continues to dominate new energy vehicle (NEV) sales in China this year, with around 37% of the market share. Tesla ranks second with a market share of 8.8%, according to CPCA data.
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.
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. TSLA stock fell nearly 4% the first trading day after the story.
Musk And Control Of Tesla
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."
Since issuing that warning, Tesla and Musk appear to be shifting toward an increased focus on autonomy, its Full Self-Driving (FSD) technology and its robotaxi program as EV demand has slowed.
Musk currently has a nearly 13% stake in Tesla. Prior to selling TSLA shares to purchase Twitter, now X, Musk owned around 22% of Tesla.
Tesla EVs In Regulators' Sights
Tesla also faces mounting pressure from regulators in 2024. A Reuters investigation found the EV giant has known of faulty suspension and steering parts across its model lineup going back at least seven years, but often blamed drivers when those parts failed.
Norway's traffic safety regulator in late 2023 confirmed it's been investigating suspension failures in Model S and X vehicles since September 2022. Sweden also announced on December 22, 2023 that it's also looking into similar issues.
This comes after a National Highway Traffic Safety Administration (NHTSA) investigation spurred Tesla to perform an over-the-air software "recall" on more than 2 million vehicles after determining that the Autopilot is prone to misuse after reviewing 1,000 accidents.
The NHTSA's Autopilot safety probe was recently closed. However it has opened a new investigation into whether the over-the-air update was sufficient.
Is Tesla Stock A Buy?
Tesla stock has retreated about 30% in 2024. However, since Tesla reported first quarter earnings and revenue on April 23, it has rallied and is finding support at its 50-day moving average, according to MarketSurge analysis. Tesla stock hit a 52-week low of 138.80 on April 22.
Tesla Stock Has Plunged In 2024, But At Least It's Cheaper, Right? Nope
TSLA shares surged nearly 7% on May 21 after PepsiCo announced 50 Tesla Semi trucks in the coming months will operate out of its Fresno, Calif., distribution facility.
Tesla stock ranks seventh in the 35-member IBD Auto Manufacturers industry group. The stock has a weak 38 Composite Rating out of a best-possible 99. Tesla stock also has a 17 Relative Strength Rating and a 62 EPS Rating.
Almost single-handedly, Elon Musk has turned the auto industry on its head. He has essentially forced it to get aboard the electric-vehicle train. It's a reason why Tesla has been a monster stock over much of its history, especially during its stratospheric run from mid-2019 to late 2021.
Tesla stock has had mammoth runs and could again. But it's not a buy right stock now.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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