Tesla will be on the spotlight next week. Our Insights

Tesla stock looks stuck in a range between $165 and $185. Something will have to change for the stock to move beyond that band. Earnings due on April 23 could be that catalyst. So, Tesla will be on the spotlight next week. We share our insights.

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Tesla will be on the spotlight

Tesla’s shares in recent times plunged from its 2021 all-time high as the automaker has been plagued by safety concerns, a slew of recalls, and a slowdown in growth. Manufacturing halt in Germany coupled with discouraging sales in China have adversely impacted Tesla’s share prices.

Q1 2024 Vehicle Deliveries: Tesla shared its vehicle delivery numbers for Q1 2024, and unfortunately, they fell short of financial analysts’ expectations. This has led to a considerable drop in Tesla’s stock price. The main question is now: if all the negative news was already priced in until now?

Analyst Projections:

Wall Street currently expects Tesla earnings per share of just $2.71 in 2024, according to FactSet. That would be more than a 13% decline vs. last year’s $3.12. Wall Street’s 2024 EPS consensus estimates for Tesla have now come down 29% since the end of 2023.

In the first quarter, Tesla produced over 433,000 vehicles and delivered approximately 387,000 vehicles. The company deployed 4,053 MWh of energy storage products in Q1, the highest quarterly deployment.

Decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at Tesla’s Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.

Tesla vehicle deliveries and storage deployments represent only two measures of the company’s financial performance and should not be relied on as an indicator of quarterly financial results, which depend on a variety of factors, including average selling price, cost of sales, foreign exchange movements and others.

Strategic factors which will affect Tesla’s share price development

Full Self-Driving (FSD) Revolution and Robotaxi Gambit:

• Recent developments at Tesla, particularly concerning Full Self-Driving (FSD), have garnered significant attention. There’s a growing belief that Elon Musk may prioritize autonomous driving, particularly with the robotaxi concept.
• Tesla’s advancements in FSD technology continue to be closely watched by investors.

Price Adjustments and Retail Strategy Overhaul:

• Tesla is lowering the price of its cars in China to garner market share.
• The company is also planning to overhaul its retail sales strategy to emphasize online sales.

As of now, Tesla Inc holds a market share of approximately 7.9% for electric vehicles in China year-to-date. This places Tesla in the third position, trailing behind BYD and SAIC, a Chinese state-owned company that includes Wuling among its brands.

It’s worth noting that Tesla’s market share in China has been dynamic, with fluctuations influenced by factors such as pricing adjustments, production capacity, and competition from other electric vehicle manufacturers. Recently, Tesla’s market share in China started to grow again, reaching 14.6% in March (from 13.6% in February) due to lowered prices and increased production at its Shanghai plant. However, the landscape remains competitive, with other Chinese EV rivals also expanding their presence in both domestic and international markets. Tesla’s market share in China is still lower than 20.0 % a year ago.

Introduction of robotaxi – a game changer for Tesla

Tesla’s Robotaxi has the potential to significantly impact the company’s revenue. In our view, if launched successfully, robotaxi business can significantly improve Tesla’s investment case:

Robotaxi Concept:

• Tesla aims to mass-produce a dedicated robotaxi by the second half of 2024. This vehicle will be highly optimized for autonomy, with no steering wheel or pedals.
• The robotaxi service will operate in various states, navigating different regulatory rules.

Revenue Estimates:

•  Tesla’s focus on robotaxis could leverage its unique AI and software advantage, leading to favorable economic.
• ARK Invest, a prominent investment management firm, forecasts that Tesla’s robotaxi fleet could generate $486 billion in annual revenue by 2026. This business could contribute significantly to Tesla’s overall value.

Profit per Mile:

• Elon Musk estimates that a single robotaxi could make a gross profit of $0.65 per mile. This calculation assumes that 50% of the miles are empty (without passengers) and an annual mileage of 90,000 miles.
• Based on this computation, one Tesla robotaxi could potentially earn around $30,000 per year.

Long-Term Potential:

• According to ARK Invest data Tesla accumulates 2.5 million miles of self-driving data from customers every day.
• While there are challenges related to regulatory hurdles and software training, Tesla’s long-term potential is closely tied to self-driving capabilities and autonomy.

In summary, Tesla’s robotaxi venture represents a strategic shift and could be a massive driver of the company’s growth.

Our View:

For the last three months Tesla’s share price dropped by 24.4%. Wall Street analysts reduced Tesla’s target price and reduced their recommendations. Average recommendation is now HOLD and the target price stays at $196 per share still implying over 10% upside potential. In our view, during the earnings release investors’ interest will be focused around robotaxi-story. We believe it can make sense to HOLD Tesla’s shares now.

Among insiders the Vanguard Group increased its holdings of Tesla by 1.71% last quarter. Goldman Sachs increased holdings by +5.54% last quarter. Bank of America increased holdings by +20.60% last quarter. Morgan Stanley increased holdings by +9.40% last quarter.

Please do not hesitate to contact us for more detailed research on Tesla.