Tesla ( TSLA ) reported worse-than-expected first-quarter earnings and revenue late Tuesday. Investors appeared unconcerned, sending TSLA shares jumping 12% on Wednesday after CEO Elon Musk signaled that “more affordable” new models are on the way. Musk also predicted that 2024 vehicle deliveries would be higher, underscoring Tesla’s focus on full-self-driving (FSD) during the earnings call.
x
Ahead of Tesla’s first-quarter earnings release on Tuesday, TSLA shares had fallen more than 17% in April, hitting a 52-week low of 138.80 on Monday. Investor sentiment appeared depressed. However, Tesla stock began to rise immediately after the first quarter results. Here are the reasons why.
Low-cost car on the way
Going into earnings, there were reports that Tesla had scrapped, or shelved, plans to produce its next-generation Model 2, a $25,000 vehicle.
However, Tesla reported that it had updated its “future car lineup to accelerate the launch of new models ahead of our previously announced production start in the second half of 2025.”
These new vehicles include “more affordable models,” according to Tesla, and will “use 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 production lines as its current vehicle lineup.
Musk added on the earnings call that the new model line will arrive early in 2025 “if not late this year.”
Executives declined to go into detail about the company’s low-cost car plans.
Wedbush Securities analyst Dan Ives, a longtime Tesla bull, wrote Wednesday that it appears Tesla is going with a “Model 2.5” instead of a Model 2.
“While 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 boss also said on the earnings call that he expects 2024 vehicle deliveries to grow over 2023. The EV giant saw 2023 deliveries hit a record 1.81 million. However, demand for electric cars appears to be slowing down this year.
Tesla reported in early April that global deliveries in the first quarter totaled 386,810, while it produced 433,371 vehicles. Deliveries included a combined 369,783 Model 3 and Model Y units, along with 17,027 “other” vehicles.
Tesla’s 386,810 deliveries in Q1 undercut even the lowest estimates and mark the lowest quarterly deliveries since 344,000 in Q2 2022. Since then, analysts have revised lower delivery estimates.
“Besides further price cuts, we believe full-year sales growth may require help from the market as well as smooth execution of lower-cost new model introductions,” Morgan Stanley analyst Adam Jonas wrote on Wednesday.
Meanwhile, Tesla ended the first quarter with a global vehicle inventory of 28 days, up 87% compared to Q1 2023. Auto gross margin, excluding regulatory credits, came in at 16.4%, above expectations of 15.9% .
“We think Q2 will be much better,” Musk said Tuesday.
The next generation platform, Robotaxi And Ride Share
Musk and Tesla also spent plenty of time Tuesday touting FSD, autonomy and artificial intelligence.
Tesla has also recently reworked full self-driving from FSD Beta to Supervised FSD. The EV giant reported that it would recognize deferred revenue of $281 million at the end of 1. quarter, according to regulatory filings.
“The way to think about Tesla is almost entirely in terms of solving autonomy and being able to enable that autonomy for a giant fleet,” Musk said on the earnings call.
He later added that “if someone doesn’t believe Tesla is going to solve autonomy, I don’t think they should be an investor in the company.”
The Tesla boss also confirmed that the company will “showcase” its robot taxi or “cybercab” on August 8, and that a low-cost vehicle will be discussed more at that time.
Tesla’s free cash flow also went negative by $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 capabilities 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 (LIFT).
Jonas said Wednesday that Tesla’s long-term goal is to offer autonomous wheelchairs. But 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 about 5% to 170.18 on Thursday during market action. Tesla shares rose 12% to 162.13, hitting an intraday high of 167.97 on Wednesday. TSLA stock fell 3.4% to 142.05 on Monday, hitting an intraday low of 138.80.
On the week, Tesla stock is up more than 15%. However, the stock is still down around 3.3% in April.
Last week, Tesla shares fell 14% and fell short of April 2023 lows.
Tesla shares are ranked 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.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
YOU MIGHT ALSO LIKE:
Is Tesla stock a buy or a sell?
Get full access to IBD stock lists and ratings
Learn how to choose good stocks? Read Investor’s Corner
Is Rivian a buy right now after it launched its new product line?
Futures fall as meta dives on guidance; Chipotle Eyes Buy Point
