Wall Street looking at Tesla’s earnings for comeback clues
Faced with falling global sales and a diving stock price, Tesla has slashed prices again on some of its electric vehicles and its “Full Self Driving” system in an apparent effort to boost the company’s earnings growth.
But Wall Street was unimpressed and will be looking for other answers from CEO Elon Musk when Tesla releases a report on its first-quarter finances after the U.S. stock market’s closing bell Tuesday. Many industry analysts say a nearly 9% sales decline in the opening three months of 2024 raises questions about demand for Teslas and other electric vehicles.
For Musk, the answer appears to be the longelusive robotaxi, which he has been touting as a growth catalyst for Tesla since the hardware for it went on sale late in 2015. Musk has called the system “Full Self Driving,” even though the company says on its website that it can’t drive itself and humans must be ready to take control at all times.
In 2019, Musk promised a fleet of autonomous robotaxis by 2020 that would bring income to Tesla owners and make their car values appreciate. Instead, they’ve declined with price cuts, as the autonomous robotaxis have been delayed year after year while being tested by owners as the company gathers road data for its computers.
Now, Musk appears to be betting that the unveiling of a new robotaxi model on Aug. 8 will be the catalyst that his company needs to return to wild annual sales growth.
Industry analysts are skeptical, and fear that Musk has canceled or delayed plans for the Model 2, a new small Tesla for the mass market that would cost around $25,000. Analysts polled by FactSet see the company’s first-quarter net income falling 42% from a year ago to $1.46 billion.
Over the weekend, though, Tesla lopped $2,000 off the price of the Models Y, S and X in the U.S. and reportedly made cuts in other countries including China. It also slashed the cost of “Full Self Driving” by one third to $8,000.
On Monday, as investors digested the price cuts, shares in Tesla Inc., which is based in Austin, Texas, fell another 3.4%, pushing the year-to-date decline to just under 43%. Since the start of the year, though, the S&P 500 index is up about 5%.
In midday trading Tuesday, shares edged up nearly 2%.
In a note to investors Monday, Bank of America Global Research analyst John Murphy wrote that Tesla’s shares have been under pressure since the start of the year due to weaker EV sales, and production that exceeds demand.
“We retain some level of skepticism on Tesla’s growth prospects, but also see opportunities as the company will unveil future growth drivers (robotaxi and Model 2) in the coming months,” Murphy wrote, adding that he maintains a neutral rating on the stock.
On Sunday, Musk wrote on X, the social media platform he owns, that like other automakers, Tesla prices change frequently “in order to match production with demand.”
From January through March, Tesla manufactured 433,371 vehicles and delivered 386,810, making over 46,000 more than it sold. This even after it cut prices last year on some of its more expensive models by up to $20,000.