Tesla Earnings Preview: Can a New Narrative Overcome Weak Fundamentals?
$Tesla Motors(TSLA)$
Analysts forecast Q1 revenue of $21.54 billion, up 1.12% year-over-year, and adjusted EPS of $0.37, up 8.24%. However, expectations have soured in recent weeks, with Bloomberg data showing a 5% cut to revenue estimates and an 8% slash to profit forecasts, reflecting concerns over weakening fundamentals.
Tesla’s stock has plummeted over 50% from its December peak, weighed down by slumping auto sales, Elon Musk's political distractions, and looming tariff-related supply chain risks. At a trailing P/E of 118—well above the 20-35 range for most megacap peers—valuations remain stretched, sitting in the 92nd percentile over three years.
Auto Business: Tariffs and Margins in Focus
Investors will zero in on how tariffs impact Tesla's auto segment, particularly its reliance on Chinese battery imports for vehicles and energy storage. Key questions: Will $Tesla (TSLA.US)$ raise prices to offset higher costs, squeezing demand, or absorb the hit, eroding margins?
Q1 vehicle deliveries slumped 13% to 336,700 units, marking Tesla's first double-digit decline and the lowest quarterly volume in three years. Weakness spanned major markets—China, the U.S., and Europe. Temporary production halts for a Model Y refresh and backlash against Musk's political activities likely dented brand appeal and demand.
JPMorgan, maintaining an “underweight” rating and a $120 price target (the Street’s lowest), slashed profit forecasts after “disappointingly weak” deliveries.
Mizuho, cutting its target to $375, warns tariffs could further inflate prices and suppress demand, potentially shaving 3.5% off 2025 U.S. revenue.
UBS, with a $190 target, sees a 25% auto tariff and upcoming 25% parts import tax adding $5,000 per vehicle, potentially reducing U.S. demand by 9% and signaling a "new era" for the auto industry.
Energy Storage: A Bright Spot
Tesla's energy storage business, including Megapack and Powerwall, is poised to shine. Q1 energy installations surged 156.6% to 10.4 GWh, a record high, driving over 200% revenue growth.
With a 25.2% margin in Q4 (vs. 16.6% for autos), the segment's robust demand and Shanghai’s new 40 GWh Megapack factory position it as a key growth driver, offsetting auto weakness.
AI and Autonomy: The Long Game
Elon Musk is doubling down on Tesla's AI pivot, betting on autonomous robotaxis and Optimus humanoid robots.
Investors will seek updates on robotaxi testing (slated for Austin in June and California later this year), unsupervised Full Self-Driving (FSD) timelines, and Optimus production (targeting 5,000 units in 2025). Clarity on these initiatives could bolster Tesla's narrative as an AI leader, even amid near-term challenges.
Post-Earnings Outlook
Tesla's track record is shaky: in the past eight quarters, it missed adjusted EPS six times, revenue six times, and saw stock swings exceed expectations in seven.
Options markets imply a ±10.96% move post-earnings, slightly below the prior four-quarter average of ±12.3%. Skewed option volatility signals bearish sentiment, yet Barclays suggests a compelling narrative could trump weak fundamentals, creating upside potential.
The Big Picture
While Tesla's energy business and AI ambitions offer hope, its core EV segment faces headwinds from tariffs, fierce competition, and brand erosion tied to Musk's controversies.
Investors must weigh whether Tesla's growth story can outweigh near-term pressures on sales, margins, and sentiment. UBS projects an 11% drop in 2025 vehicle deliveries, underscoring the challenges ahead.
Tesla's Q1 report is a high-stakes moment. Will its energy and AI bets spark optimism, or will auto struggles and tariff fears dominate?
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