Tesla reports fourth-quarter earnings late Wednesday and analysts are not overly optimistic.
TSLA stock is slumping to begin 2024. The company continues to cut vehicle prices — putting pressure on margins — as electric vehicle supply outstrips demand. The EV giant is not expected to see profits grow in 2024. Meanwhile, Chief Executive Elon Musk has threatened he needs more TSLA shares and voting power in order to make the EV giant an AI and robotics leader.
Against this backdrop, Wall Street forecasts Q4 EPS will fall 39% to 73 cents with revenue increasing 5% to $25.62 billion. For the full 2023 year, analysts predict earnings dipped 25% to $3.05 per share with sales of $97.46 billion, up 20% compared to 2022.
However, all eyes will be on 2024 guidance and whether Musk will continue cutting vehicle prices.
On Monday, Morgan Stanley analyst Adam Jonas cut his TSLA price target to 345, down from 380, but kept an overweight rating on the shares. The longtime Tesla bull wrote he expects Tesla's 2024 volume and profitability outlook to be modest when it announces fourth-quarter earnings late Wednesday.
"Global EV momentum is stalling. The market is oversupplied vs. demand," Jonas wrote.
The consensus among analysts for 2024 has Tesla EPS down to $3.63 a share vs. $3.81 at the end of last year. It was $5.65 at the end of January 2023. The current forecast is well below Tesla's 2022 levels.
Tesla stock pared early gains, falling 0.7% to 207.60 Wednesday during market action. TSLA shares on Tuesday closed up 0.2% to 209.14.
All Eyes On Price Cuts
To maintain sales momentum in 2023, Tesla aggressively cut vehicle prices and offered discounts throughout the year. Auto gross margins, which peaked at 30% in Q4 2021 amid industry chip shortages, have plunged well below 20%.
With Tesla continuing to cut prices early in 2024, deciding in January to trim China vehicle prices and slash Model Y prices in many European countries, analysts see auto gross-profit margins as a key question going into Q4 earnings.
Wall Street consensus has auto gross-profit margins, excluding regulatory credits, hitting 15.7% in Q4.
Last week, Gary Black, managing partner of the Future Fund, posted on X that based on the January price cuts he was revising 2024 earnings estimates to $3.75 per share, down from $3.90 per share.
Black added that Tesla management "still does not see that cutting configurator prices and inventory discounts by the same amount is value destructive."
Tesla's Record Q4 Deliveries Take A Back Seat
Tesla reported on Jan. 2 that deliveries in the fourth quarter exceeded Wall Street predictions, with the global EV giant selling a record-setting number of vehicles and hitting full-year expectations.
Elon Musk's Tesla reported that it delivered 484,507 vehicles during the fourth quarter and 1.81 million in 2023, exceeding its 1.8 million target.
However, reaction among analysts was muted as Wall Street appears squarely focused on end-of-year earnings and potential profit struggles in 2024.
So far in January, Tesla stock has retreated nearly 16%, falling below key levels of support. Tesla bulls remain focused on Tesla's AI and robotics potential, the newly launched Cybertruck, the expected next-generation vehicle and decisions by legacy automakers to scale back EV plans.
Reuters reported late Tuesday that Tesla has told suppliers it wants to begin production of a new mass market vehicle, codenamed "Redwood," in mid-2025. At the end of 2023, Wedbush analyst Dan Ives, a longtime Tesla bull, said at the end of 2023 that he estimates Tesla will announce the next-generation offering in six to nine months.
Meanwhile, Tesla began rolling out FSD (full self driving) Beta Version 12 to some paying customers on Sunday night.
Futures: Tesla Skids Late On Earnings Miss With Elon Musk Due
Tesla Stock Performance
TSLA shares have retreated more than 16% in January. Last week, Tesla stock fell 3% for its fifth straight weekly decline. In the last two weeks, Tesla has tumbled below the 50-day and 200-day lines. Investors could use 265.13 and 278.98 as potential buy points. Tesla stock is technically in an awkward double-bottom base, according to MarketSmith analysis.
The relative strength line, which tracks a stock's performance vs. the S&P 500, is at its lowest level since late May, according to MarketSmith.
In 2023 Tesla doubled, easily outperforming the broader S&P 500 index. Tesla stock ranks fifth in the 35 member IBD Auto Manufacturers industry group. The stock has a 60 Composite Rating out of a best-possible 99. Tesla stock also has a 66 Relative Strength Rating and an 88 EPS Rating.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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