Interpreting Tesla’s (NASDAQ:TSLA) first-quarter results positively might seem challenging at first glance, but that’s precisely what the market seemed to be doing on Wednesday.
Tesla shares surged 12% higher in Wednesday’s trading session, even after the EV leader missed expectations on both the top and bottom lines in its Q1 report.
For the first time since 2020, quarterly revenue dropped, falling from $23.33 billion a year ago to $21.31 billion, amounting to an 8.5% year-over-year decline, and coming in $950 million below expectations. Meanwhile, in what represented the lowest EPS notched in ten quarters, adj. EPS landed at $0.45, 5 cents below the Street’s forecast.
Other important metrics were hardly more encouraging. Operating margin reached 5.5% compared to the last quarter’s 8.2% while operating income hit $1.17 billion, missing the Street’s forecast of $1.64 billion. Additionally, automotive GM ex-credits and leasing came in at 15.6%, thereby falling shy of consensus at 16.8%.
That all sounds pretty horrible, so what was the spike all about? Basically, that’s down to some reassuring noises made by CEO Elon Musk about what is coming next, namely the prospect of cheaper models.
As noted by Wedbush analyst Daniel Ives, the concern on the Street was that Tesla would abandon its plans for a low-cost model and turn its focus immediately to robotaxis, but Musk said there are plans to introduce new “more affordable” models either in the beginning of 2025 or possibly toward the end of 2024. These will incorporate elements of its autonomous technology and will be manufactured using the current production lines.
Musk declined to specify whether the new models would simply be updated versions of existing ones, but Ives is happy enough to take what’s on offer.
“Last night in a much needed conference call Elon Musk finally stepped up as the adult in the room and laid the foundation for Tesla’s growth strategy with most importantly a lower cost vehicle now slated for 2025 production and delivery,” he explained. “The bears so far in 2024 have won this battle and been very right….but we believe the next wave of the Tesla growth story and autonomous vision is now forming and that is what we are focused on for our bullish investment thesis looking ahead.”
While not expecting the story to “turnaround overnight,” Ives still rates Tesla shares as Outperform (i.e., Buy), although his price target is lowered from $300 to $275. Nevertheless, the revised figure still suggests the shares will post growth of ~70% in the year ahead. (To watch Ives’ track record, click here)
Most on the Street, however, aren’t willing to get that bullish. Overall, on account of 19 Holds and 8 Buys and Sells, each, the analyst consensus rates the stock a Hold. Going by the $177.30 average target, the shares will generate returns of 9% a year from now. (See Tesla stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
