Tesla Inc. (NASDAQ: $TSLA) is the world’s biggest EV maker. It designs, manufactures, and sells electric vehicles for the mass market.
On Tuesday, April 23, 2024, after markets closed, the EV maker released its Q1 fiscal 2024 results, with the stock rising after revealing accelerated plans to launch a budget EV.
Tesla’s Profit and Revenue Tank in Q1
In the first quarter of fiscal 2024, Tesla reported revenue of $21.30 billion, a 9% Y/Y decline, and below forecasts of $22.15 billion. GAAP net income fell 55% to $1.13 billion from $2.51 billion in Q123. The GAAP EPS fell 53% to $0.34 compared to $0.73 in Q123. On a non-GAAP basis, net income fell 48% to $1.54 billion, while non-GAAP EPS fell 47% to $0.45, below the forecast of $0.51.
The adjusted EBITDA margin fell 240 basis points to 15.9% compared to 18.3% in Q123, while the operating margin fell 592 basis points Y/Y to 5.5% compared to 11.4% the previous year. Meanwhile, the gross margin fell by 199 basis points to 17.4% compared to 19.3% the previous year.
Tesla’s free cash flow fell 674% into negative territory at $2.53 billion at the end of Q124, while cash and cash equivalents increased 20% to $26.86 billion. The company attributed the decline in free cash flow to a $2.7 billion rise in inventory and capital expenditure of $1 billion in AI infrastructure.
Total vehicle production fell 2% Y/Y in Q124 to 433,371, while total deliveries fell 9% to 386,810.
Tesla’s Outlook
In its outlook, the company stated that it was between two major growth waves. It stated that the second growth wave would be catalyzed by advances in autonomous driving and advances built on their next-gen platform.
Tesla forecasts volume growth will be lower in 2024 than in 2023 as they work on the launch of their next-gen platform and other products. The company expects the energy storage deployments and revenue to outpace the automotive business in 2024.
The company stated that it would prioritize a strong balance sheet during the period of uncertainty. It also expects that hardware-related profits will be accompanied by an increase in AI and fleet-based profits.
Tesla Announces Budget EV Launch in 2025
In its forecast, Tesla revealed that it had updated the future launch line to accelerate the launch of new models ahead of the previous schedule of the second half of 2025. The new launches will include affordable EVs while utilizing aspects of their next-gen platform and current platform.
According to Tesla, the new lineup could lead to less cost reduction than previously projected but enable the company to grow volumes in a more efficient manner amid uncertainty. The changes will enable them to utilize their current maximum capacity of almost three million vehicles, enabling more than 50% growth compared to fiscal 2023.
Additionally, it plans to continue utilizing its “unboxed” manufacturing strategy for the purpose-built robotaxi.
TSLA Stock Performance
Following the announcement of accelerated plans to launch budget EVs, TSLA shares jumped 11.72% on Wednesday, April 24, to $161.64 as of 1:52 PM in New York.
Before the current surge, Tesla stock was down over 40% year-to-date, the lowest since January 2023, amid concerns about Chinese competition, weak deliveries, and price cuts. At the start of April, the company announced an 8.5% Y/Y decline in deliveries.
Analysts Forecast
According to 35 stock analysts, Tesla has an overall hold rating. The analysts give the stock a broad target range with a high of $310 and a low of $22.86 in the next 12 months. They forecast an average price of $177.30, which is a 10.90% upside from the most recent price.
Should You Add Tesla to Your Portfolio?
Despite the recent decline in revenue and earnings, investors are enthusiastic about Tesla, with the stock rising by over 9% on Wednesday. They have chosen to look past the poor financial results in Q124, instead focusing on the company’s future plans. This includes Elon’s robotaxi plans and the accelerated timeline for the launch of budget EVs.
While self-driving technology could take years to roll out, investors are willing to pay a premium as long as the technology remains credible. Thus far, Tesla has made massive progress in this area, including a $1 billion investment in AI. Consequently, TSLA shares could continue to be lucrative in the long term.
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