Tesla Set to Report Q4 Results Late Wednesday

January 23, 2024
After 2023's price cuts and tougher competition, Tesla is set to report late Wednesday. Lower demand and a big, one-time jump in used EVs could drive a very different 2024.

Investors appear to be hunkering in for a low-spark start to electric vehicle (EV) earnings season this week, and not just because frigid temperatures left many EV owners shivering next to slow chargers. 

With Tesla's (TSLA) results expected Wednesday, many might ask if the recent slowdown in EV sales—and now a major, one-time influx of used cars into the U.S. market—could have global implications. Though with TSLA, the spotlight increasingly tends to linger on the expanding business lines and behavior of its CEO Elon Musk. 

A host of headlines this month alone could add context to the numbers that U.S. EV makers report in their final quarter: 

  • Before today's open, Tesla's stock price was down nearly 16% for 2024, following price cuts throughout China and Europe on its Model Y and Model 3 vehicles. Analysts forecast TSLA's Q4 earnings per share (EPS) to be down nearly 38% from the year-ago quarter, with revenues up nearly 5%. In 2023, the company's stock finished up nearly 102%. 
  • Chinese automaker BYD—which still counts Berkshire Hathaway's (BRK.B) Warren Buffett as an investor despite the Omaha billionaire's recent trims to that stake—became the world's biggest EV manufacturer last year. That growth drew fire as Reuters reported January 12 that the European Commission (EU) is investigating BYD and other Chinese EV makers for unfair advantage in European markets related to government price subsidies. 
  • Vehicle charging problems made big news in 2023, from various published reports about unreliable public charging stations to a J.D. Power study early last year showing increasing consumer dissatisfaction with home charging. month's cold snap seemed to chill the charging advancement story even more, according to multiple news outlets.
  • Auto rental giant Hertz (HTZ) said earlier this month it's selling about 20,000 EVs from its fleet and replacing them with gasoline-powered cars.

From plug—to pump?

Cox Automotive (COX) said earlier this month that 2024 EV sales will exceed 2023's million-car record, though not by leaps and bounds. The auto research firm said its EV sales forecast has shifted from "rosy to reality" as "customer acceptance of EVs isn't keeping pace." 

Among the reasons? First, the overall automotive sales market continues to stabilize after pandemic-era shortages that sent new and used sticker prices higher on all vehicles.

But on the EV front, enthusiasm seems to have hit a pothole. Cox noted that despite first-time instant rebates at dealerships, fewer EVs may qualify for tax credits due to new guidelines this year. It added that "the used EV market is expected to be the fastest-growing segment of the wholesale/used-vehicle market" in 2024, just a few days before Hertz (HTZ) put a third of its EV fleet up for sale online as well as its nationwide locations. Last week, the New York Times also reported that hybrid cars have become more popular with car buyers not fully ready to flip the switch on EVs. 

Hertz, in a Securities and Exchange Commission (SEC) on January 11 said it would reinvest some of the proceeds from the used market in new internal combustion engine vehicles to "meet demand." 

It's also worth noting that Ford (F) began laying off workers at its Detroit-area F-150 Lightning EV plant on Friday. Ford's main entry in the EV pickup race posted sales gains and added plant capacity during 2023, but the Big Three leader confirmed in multiple news outlets last month it would cut 2024 Lightning production in half because demand still wasn't where Ford wanted it to be. 

For competitors, potential hazards ahead

Tesla stock withstood several analyst downgrades last summer, and its smaller, pure-play EV competitors saw their ratings lowered in the past few days. They report results next month: 

  • Rivian (RIVN) stock rose more than 40% in December—just days after TSLA started delivering its new Cybertruck—but shares have dropped more than 20% since the start of the year. Last Wednesday, Deutsche Bank downgraded RIVN to a hold from a buy on concerns about RVIN's 2024 production estimates, saying it expects the truck maker's gross margins will be pressured the rest of the year. The company is expected to report February 21.
  • Luxury EV sedan maker Lucid (LCID) was downgraded January 11 to a strong-sell from a sell rating by CFRA Research, which noted Q4 shipments fell short of CFRA's forecasts and that it expects "additional lows" in its stock price to be set. The company is also expected to report February 21.
  • Fisker (FSR) was cut to hold from buy by TD Cowen (COWN), noting fewer deliveries than expected and the overall softening of the EV market. Its results are due February 26. However, Monday the company announced that it expects to sell 5,000 unsold vehicles made last year by the end of its first quarter, sending its stock up more than 17%. However, Monday the company announced that it expects to sell 5,000 unsold vehicles made last year by the end of its first quarter, sending its stock up more than 17%.

Questions for Tesla

During TSLA's Q3 earnings call in October 2023, Musk signaled concerns about the overall health of the global economy as TSLA reported lower-than-expected EPS and operating margins less than half the year before. 

However, on January 2, the company announced it finished the year slightly above its own delivery forecast for 1.8 million cars against 2022's 1.37 million. Deliveries for Q4 alone came in at 484,507 vehicles, above analyst consensus for 477,000. 

But EVs are not Tesla's only business, and Musk used that point to drive conversation ahead of this week's earnings call. 

Last Tuesday, Musk announced on his X social media platform—formerly Twitter—that he wanted 25% voting control of Tesla before expanding its artificial intelligence and robotics operation. Without that stake, Musk said he'd "prefer to build products outside of Tesla. You don't seem to understand that Tesla is not one startup, but a dozen." Immediately after Musk's comments, TSLA's price headed lower.

Investors might want to hear more about the "dozen" other startups during Tesla's earnings call, but they might want some updates on current operations too. Here are a few issues potentially worth listening for:

  • Are price cuts still working? As price cuts have extended into the new year, and given BYD's reported growth in China and Europe, is Tesla still able to expand market share? Related to that, how will margins look in 2024?
  • What about the rate picture? Experts are divided on how soon the Federal Reserve could begin rate cuts, but how could those reductions affect auto sales in general and EVs in particular? 
  • Middle East tensions: Tesla is just one automaker dependent on Red Sea shipments to get parts, and recent attacks on shippers and retaliatory U.S. and British air strikes against Yemen could mean further delays. How will that affect Tesla's operations? 
  • Construction update: Where will the company be building auto, battery, and other manufacturing facilities next as potential facility sites have been reported for Europe, Asia, and North America?
  • Reliability reports: How are media reports about vehicle and charging station reliability affecting the company? On the consumer front, Consumer Reports recently said EVs are "less reliable than conventional cars" in its annual car reliability survey. Leadership reliability seems to be on display as well, with an early January Wall Street Journal article detailing unidentified Tesla executives' fears about Musk's alleged drug use.

Finally, once again, it's time to ask about the Cybertruck. Deliveries of Tesla's first pickup began in November—so, how are they rolling?

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Closing Market Update

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Opening Market Update

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