Tesla (TSLA) reported worse-than-expected first-quarter earnings and revenue late Tuesday. Investors appeared not to care, sending TSLA shares jumping 12% Wednesday after Chief Executive Elon Musk signaled "more affordable" new models are on the way. Musk also predicted 2024 vehicle deliveries would be higher, stressing Tesla's focus on full-self driving (FSD) during the earnings call.
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Ahead of Tesla announcing first-quarter earnings Tuesday, TSLA shares had fallen more than 17% in April, hitting a 52-week low of 138.80 on Monday. Investor sentiment seemed downcast. However, Tesla stock began rallying immediately following Q1 results. Here are the reasons why.
Low Cost Vehicle Coming
Going into earnings, there were reports Tesla had scrapped, or sidelined, plans to produce its next-generation Model 2, a $25,000 vehicle.
However, Tesla reported that it had updated its "future vehicle lineup to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025."
These new vehicles include "more affordable models," according to Tesla and will "utilize aspects of the next generation platform as well as aspects of our current platforms." Tesla said it could produce these new vehicles on the same manufacturing lines as its current vehicle lineup.
Musk added on the earnings call that the new model line will come early in 2025 "if not late this year."
Executives refused to go into further detail about the company's low-cost vehicle plans.
Wedbush Securities analyst Dan Ives, a longtime Tesla bull, wrote Wednesday it appears that Tesla is going with a "Model 2.5" instead of a Model 2.
"While it's not a next generation Model 2 platform, we believe this is the right strategy and move at the right time," Ives wrote.
Tesla Stock: Musk Predicts Higher 2024 Vehicle Deliveries
The Tesla chief also said on the earnings call that he expects 2024 vehicle deliveries to grow compared to 2023. The EV giant saw deliveries in 2023 hit a record 1.81 million. However, EV demand appears to be slowing this year.
Tesla reported in early April that global first-quarter deliveries totaled 386,810 while it produced 433,371 vehicles. The deliveries included a combined 369,783 Model 3 and Model Y units along with 17,027 "other" vehicles.
Tesla's 386,810 deliveries tally in Q1 undercut even the lowest estimates and marks the lowest quarterly deliveries since 344,000 in Q2 2022. Since then, analysts have been revising lower delivery estimates.
"Apart from further price cuts we believe full-year sales growth may require help from the market as well as seamless execution on cheaper new model introductions," Morgan Stanley analyst Adam Jonas wrote Wednesday.
Meanwhile, Tesla ended the first quarter with a global vehicle inventory of 28 days, up 87% compared to Q1 2023. Auto gross profit margins, excluding regulatory credits, came in at 16.4%, above expectations of 15.9%.
"We think Q2 will be a lot better," Musk said Tuesday.
Next-Generation Platform, The Robotaxi And Ride Share
Musk and Tesla also spent plenty of time Tuesday touting FSD, autonomy and artificial intelligence.
Tesla also recently recast full self-driving from FSD Beta to supervised FSD. The EV giant reported it would recognize deferred revenue of $281 million by the end of Q1, according to regulatory filings.
"The way to think of Tesla is almost entirely in terms of solving autonomy and being able to turn on that autonomy for a gigantic fleet," Musk said on the earnings call.
He later added that "if somebody doesn't believe Tesla is going to solve autonomy, I think they should not be an investor in the company."
The Tesla chief also confirmed the company will be "showcasing" its robotaxi, or "cybercab," on Aug. 8 and that a low cost vehicle will be discussed more at that time.
Tesla's free cash flow also went negative to the tune of $2.5 billion in Q1, as Tesla spent $1 billion on "AI infrastructure."
The company also said it will "continue to increase" its AI infrastructure capacity in the "coming months" and that it is currently working on ride-hailing functionality that will be "available in the future."
This could potentially put Tesla in competition with Uber (UBER) and Lyft (LYFT).
Jonas said Wednesday that Tesla's long-term goal is to offer autonomous ride-hailing vehicles. However, initially it will rely on "human-supervised FSD" from a combination of Tesla owners and a Tesla owned fleet, according to Jonas.
Tesla Stock Performance
TSLA shares jumped around 5% to 170.18 Thursday during market action. Tesla stock gained 12% to 162.13, hitting an intraday high of 167.97, on Wednesday. TSLA stock on Monday fell 3.4% to 142.05, hitting a low of 138.80 intraday.
On the week, Tesla shares are up more than 15%. However, the stock remains down around 3.3% in April.
Last week, Tesla stock dived 14% and undercut April 2023 lows.
Tesla stock ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a 28 Composite Rating out of a best-possible 99. Tesla stock also has a 14 Relative Strength Rating and a 63 EPS Rating.
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