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Tesla's Earnings and Market Outlook

General Report October 28, 2024
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TABLE OF CONTENTS

  1. Summary
  2. Current Earnings Landscape
  3. Revenue and Profit Trends
  4. Delivery and Production Insights
  5. Market Dynamics and Analyst Perspectives
  6. Conclusion

1. Summary

  • Tesla's recent financial performance reveals a delicate balance between growth prospects and current challenges. The company is projected to announce its Q3 2024 earnings, with estimates indicating an earnings per share (EPS) of 58 cents and revenues of $25.6 billion. These figures continue a trend of declining EPS, with a year-over-year decrease of 12.12%, while revenues show a modest increase of 9.5%. Over the past four quarters, Tesla has consistently missed EPS estimates, accentuating concerns about its earnings potential. Despite challenges in automotive revenue, influenced by factors such as supply chain disruptions, Tesla's delivery numbers exceeded expectations, providing a counterpoint to the overall financial outlook. Analytical perspectives suggest a "hold" consensus on Tesla stock, with varied ratings indicating mixed sentiment among investors. The report delves into Tesla's position within the electric vehicle market, highlighting the competitive pressures and expectations surrounding delivery targets and production metrics. The analysis also touches on Tesla's stock performance, which has outpaced industry peers, emphasizing the company's ability to maintain investor interest amid volatility.

2. Current Earnings Landscape

  • 2-1. Overview of Tesla's Q3 2024 Earnings Expectations

  • Tesla is expected to release its third-quarter 2024 results after the market closes on Wednesday. The Zacks Consensus Estimate projects earnings of 58 cents per share and revenues of $25.6 billion for the upcoming quarter. It is important to note that the earnings estimate shows a year-over-year decline of 12.12%, while the revenue forecast indicates a year-over-year increase of 9.5%. For the current year, the expected revenue is set at $98.7 billion, marking a 2% rise compared to the previous year. However, the consensus for the 2024 earnings per share (EPS) is projected to be $2.25, which signifies a contraction of approximately 28% year-over-year.

  • 2-2. Recent Earnings Performance and Market Reactions

  • In the previous four quarters, Tesla has consistently missed EPS estimates, accumulating an average negative earnings surprise of 8%. This trend has impacted market reactions, leading to heightened scrutiny from investors and analysts. The company's performance has been closely monitored, especially as investors anticipate updates during the earnings call, including key insights from CEO Elon Musk pertaining to Tesla's product roadmap and anticipated developments like the robotaxi.

  • 2-3. Historical Earnings Surprises and Projections

  • Historically, Tesla has faced challenges with earnings surprises, having missed estimates in all of its last four quarters. Market analysts have slightly adjusted their revenue and earnings forecasts downward ahead of the Q3 earnings report, reflecting a cautious outlook on the company's financial performance. The projected earnings and revenue trends may lead to further volatility in investor sentiment as these figures will be pivotal in determining Tesla's position in the market leading up to the earnings announcement.

3. Revenue and Profit Trends

  • 3-1. Year-over-Year Changes in Revenue and EPS

  • Analysts project that Tesla's diluted earnings per share (EPS) will reach 50 cents, which reflects an increase from 34 cents in the previous quarter but shows a decrease from the 78 cents reported in the same quarter a year ago. Furthermore, Tesla's net income for the upcoming quarter is estimated to be $1.73 billion, up from the $1.13 billion recorded in the first quarter of 2024, although this is a decline compared to the $2.7 billion from the second quarter of the previous year. In Q1 2024, Tesla’s automotive revenue experienced a year-over-year decline of 13%, amounting to $17.4 billion, impacted by a 9% drop in deliveries and reduced average selling prices.

  • 3-2. Market Estimates for Upcoming Earnings

  • Tesla is expected to release its second-quarter 2024 results on July 23, with the Zacks Consensus Estimate suggesting earnings of 62 cents per share and revenues of $25.1 billion. This earnings estimate has been revised upward by 2 cents in the past month, although it indicates a year-over-year decline of 32%. The forecast for quarterly revenues suggests a modest increase of 0.8% from the previous year. For the entire year, the Zacks Consensus Estimate for Tesla's revenues stands at $98 billion, projecting a rise of 1.7% year-over-year, while the consensus mark for EPS in 2024 is set at $2.48, implying a contraction of about 20.5% compared to the previous year.

  • 3-3. Factors Influencing Revenue Declines and Increases

  • The decrease in Tesla's automotive revenue is attributed to several factors, including seasonality, macroeconomic challenges, factory shutdowns in Germany, and supply chain disruptions. The overall drop in total revenues, which reached $21.3 billion in Q1 2024, was driven by these variances in automotive sales and services. Despite these challenges, Tesla is projected to improve its performance in the second quarter. Furthermore, the consensus ratings from analysts reflect a predominantly Hold rating, with a total of 34 ratings summarized as seven Sell, 15 Hold, and 12 Buy ratings. The consensus price target is noted at $203.03, indicating a potential downside of approximately 15% from current trading levels.

4. Delivery and Production Insights

  • 4-1. Impact of Delivery Numbers on Financial Performance

  • Tesla delivered 443,956 electric vehicles (EVs) for the quarter ending June 30, 2024, resulting in a first-half total of 830,766. Despite strong delivery numbers that exceeded the consensus expectation of 439,302, Tesla remains slightly behind its full-year target of 2 million deliveries. The significant delivery figures positively influence investor sentiment amid a volatile market, as evidenced by a 24% rally in Tesla's stock in July following the production and deliveries report.

  • 4-2. Production Metrics and Market Expectations

  • During the second quarter of 2024, Tesla's production stood at 410,831 vehicles. Analysts are closely monitoring the operating profit margin, which dropped to 5.5% in the first quarter, attributed to declines in EV prices. As the company continues to improve its inventory levels, there are expectations of positive free cash flow, which may signal a recovery in production efficiency and financial health.

  • 4-3. Analyst Ratings and Future Outlook Post-Delivery Reports

  • Analysts predict Tesla's Q2 2024 revenue to be around $24.7 billion, which is a slight decrease from the $24.9 billion reported in the same period last year. Earnings per share (EPS) are estimated at $0.62, down from $0.91 in the previous year. Despite falling EPS, analysts emphasize the potential for growth through Tesla's energy storage segment and other innovative projects. There has been growing investor interest in updates regarding Tesla's autonomous robotaxis and other initiatives in artificial intelligence.

5. Market Dynamics and Analyst Perspectives

  • 5-1. Analyst Consensus on Tesla's Future Performance

  • Analysts project that Tesla (TSLA) will post earnings of $0.57 per share in its upcoming earnings report, which is expected to represent a year-over-year decline of 13.64%. Additionally, the latest consensus estimates forecast a revenue of $25.62 billion, reflecting a 9.74% increase from the same quarter last year. For the entire fiscal year, earnings are projected at $2.25 per share and a revenue of $98.78 billion, indicating changes of -27.88% and +2.08%, respectively, from the prior year.

  • 5-2. Market Sentiment and External Influences

  • Tesla's stock closed at $244.54, showing a 1.54% increase from the previous day, which outperformed the S&P 500's daily gain of 0.97%. The Dow rose by 0.3%, while the tech-heavy Nasdaq saw an increase of 1.45%. Over the past month, Tesla's stock has risen by 11.36%, surpassing the 5.28% increase in the Auto-Tires-Trucks sector and the 5.41% increase in the S&P 500. Investors are closely monitoring Tesla as it approaches its earnings disclosure on October 23, 2024.

  • 5-3. Comparison with Industry Peers and Sector Performance

  • In comparison with industry peers, Tesla's recent performance has been notable. The company's stock performance of +11.36% over the past month exceeds both the Auto-Tires-Trucks sector's gain of 5.28% and the overall market's S&P 500 gain of 5.41%. These metrics reflect Tesla's ability to outperform its sector and highlight the company's positive trajectory despite current challenges.

Conclusion

  • The analysis underscores Tesla's ongoing challenges with fluctuating earnings and revenue figures amidst varying delivery metrics. As Tesla approaches its upcoming earnings report, investor sentiment hinges on several factors, including the company's ability to overcome macroeconomic challenges and supply chain disruptions, which have notably impacted its automotive revenue. Analysts point out that Tesla’s trajectory remains a curious blend of promise and uncertainty, with its innovative capabilities in renewable energy projects and autonomous technologies offering potential avenues for future growth. Nonetheless, limitations due to market volatility and delivery constraints highlight the need for prudent strategic adjustments. Moving forward, Tesla's capability to enhance production and expand its energy storage sector could be instrumental in improving its financial metrics. These steps could help Tesla, Inc. solidify its market position while also offering investors confidence in its longer-term growth path. For practical application, stakeholders might consider focusing on Tesla's efforts in enhancing operational efficiency and innovation to harness emerging opportunities in the electric vehicle sector.

Glossary

  • Tesla, Inc. [Company]: Tesla, Inc. is a leading electric vehicle manufacturer known for its innovation in automotive technology and renewable energy solutions. Its performance in the stock market and earnings reports are closely monitored by investors and analysts, making it a significant entity in the automotive and technology sectors.

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