Tesla Stock: Is Elon Musk About to Force Everyone to Consider Tesla an AI Company After Earnings?

On Tuesday, all eyes will be on CEO Elon Musk Tesla‘s (TSLA) The first quarter earnings results are raising eyebrows as investors look for clarity and insight into his strategy and whether Musk is rebranding Tesla in plain sight. TSLA shares fell early Monday.

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It has become increasingly clear in recent weeks that Musk and Tesla are shifting towards a greater focus on autonomy, Full Self-Driving (FSD) and its robotaxi program, as demand for electric cars has declined in 2024.

With Tesla reporting first-quarter earnings and revenue figures late Tuesday, Wall Street might get some answers.

Last week, Tesla announced plans to lay off more than 10% of its global workforce, with key executives leaving the company, and Musk said this is part of the next “phase of growth.”

The layoffs come after Reuters reported on April 6 that Tesla has shifted focus from the $25,000 next-generation Model 2 in favor of prioritizing efforts on its robotaxi program. Following the report, Musk quickly announced that Tesla will unveil the robotaxi on August 8.

Musk also spoke to X, formerly Twitter, on April 6, saying, “Tesla is an AI/robotics and renewable energy company.” The Tesla chief has long said the company is more than just a car company, but his recent statement signals a shift away from the car label.

A key question for the Tesla earnings call is whether Elon Musk will put the Model 2 aside for several years.

Adding to the uncertainty, Tesla last week asked shareholders to ratify Musk’s $56 billion compensation plan for 2018, despite a Delaware court annulling the plan earlier this year. The shareholders’ meeting is scheduled for June 13. Musk posted on X in January that he wanted to “easily grow Tesla into a leader in AI and robotics without” about 25% voting control.

Tesla Stock: Moving Away From EV Business

Early Monday, TSLA shares fell 4% to 141.17 during Monday’s market action, hitting a new 52-week low.

Tesla shares fell about 2% on Friday, down 14% for the week and undercutting April 2023 lows.

Deutsche Bank analyst Emmanuel Rosner wrote Thursday that it now appears Tesla’s future is tied to “cracking the code for full driverless autonomy,” which represents a “significant technological, regulatory and operational challenge.”

The analyst added that the shift in focus to the robotaxi “changes the thesis” and that it could undergo a “potentially painful transition in ownership base” with EV investors “throwing in the towel” and “eventually being replaced by AI/ tech investors with significantly longer time horizons.”

Meanwhile, Morgan Stanley analyst Adam Jonas wrote on Wednesday that “it appears” Tesla is leaving the traditional EV car industry.

“This does not mean that Tesla will not continue to sell cars (including new launches) in the coming years,” Jonas added.

Ready for first quarter profits

With few details on Musk’s strategy toward the robotaxi and next-generation vehicle, investors and analysts appear skittish ahead of the upcoming first-quarter earnings results Tuesday after the market closes.

Analysts expect first-quarter earnings to fall more than 42% to 49 cents per share, while revenue will fall nearly 5% to $22.2 billion. If Tesla’s first-quarter earnings per share come in as expected, it would be the lowest quarterly level since the EV giant traded at 48 cents per share in the second quarter of 2021. It would be the first annual decline in sales since the start of the pandemic.

Tesla recently reshuffled Full Self-Driving from FSD Beta to FSD Supervised. That suggests the EV giant could realize more deferred FSD revenue, boosting earnings per share. As a result, Tesla’s cash flow will be an important number to watch in the first quarter.

Tesla also started offering free FSD trials with the purchase of a new vehicle in April. Then this weekend, the EV company cut the annual FSD price by 33% to $8,000. The move comes two weeks after he dropped the monthly FSD subscription price from $199 per month to $99 per month.

Tesla reported in early April that a total of 386,810 vehicles were delivered worldwide in the first quarter, while the company produced 433,371 vehicles. Deliveries total 369,783 Model 3 and Model Y units, along with 17,027 “other” vehicles. Tesla’s 386,810 first-quarter deliveries undercut even the lowest estimates and mark the lowest quarterly deliveries since 344,000 in the second quarter of 2022.

The EV giant blamed the first quarter performance on problems ramping up production of the updated Model 3 and factory closures.

Meanwhile, the release of Tesla’s Q1 deliveries marked the first time the company included Tesla Energy’s totals, another sign that the global EV giant is officially changing or broadening its focus.

Vehicle price cuts continue to come after discounts disappear

Tesla also continued to cut car prices this weekend, with price cuts for electric vehicles in the US, China and Europe.

In the US, the Model Y now starts at $42,990, before incentives and excluding taxes and fees. The starting price of the Model S is $72,990, while the Model X starts at $79,990. Model Y and Model X are eligible for Inflation Reduction Act (IRA) credits of $7,500.

Tesla Cybertruck and Model 3 prices remained unchanged, while production of both electric vehicles was still low. This comes after Tesla last week removed all US discounts on existing stock models. Effective Model Y prices are therefore higher in the US than a week earlier.

“Other cars change prices constantly and often by wide margins via dealer markups and production/dealer incentives,” Musk wrote on X Sunday. “Tesla prices must change regularly to match production to demand.”

To maintain sales momentum in 2023 and 2024, TSLA has aggressively reduced vehicle prices and offered rebates. Automotive gross profit margins, excluding regulatory credits, which peaked at 30% in the fourth quarter of 2021 due to industry chip shortages, have fallen well below 20%.

Tesla stock performance

Shares of TSLA tumbled 14% to 147.05 last week, their worst level since January 2023. Tesla shares are now down more than 16% in April after falling about 13% in March.

The week before, TSLA gained almost 4%, buoyed by Elon Musk’s promise of unveiling a robotaxi on August 8. But Tesla shares are now down more than 40% through 2024 and the stock is trading well below its 50- and 200-day trading range. moving averages.

Tesla stock has plummeted in 2024, but at least it’s cheaper, right? No

Meanwhile, Tesla shares have been in a downturn for nearly 900 days, the second long downturn since its initial public offering (IPO) in 2010, according to Charlie Bilello, chief market strategist at Creative Planning.

According to the Wall Street consensus, Tesla earnings for 2024 are well below 2023 levels. That signals a new year of profit declines for this growth stock. According to FactSet, Wall Street currently expects Tesla earnings per share of just $2.67 in 2024. That would be a decline of more than 14% from last year’s $3.12.

Wall Street’s 2024 consensus estimates for Tesla have fallen 30% since the end of 2023.

Looking further ahead, the Wall Street consensus calls for Tesla’s 2025 earnings per share to reach $3.64, down from the projection of $5.29 at the end of 2023, according to FactSet.

The EV giant ranks eighth in the IBD with 35 members Industry group of car manufacturers. The stock has a Composite Rating of 28 out of a best possible 99. Tesla stock also has a Relative Strength Rating of 11 and an EPS Rating of 67.

Follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.

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