Tesla (TSLA) stock is angling lower, falling around 30% so far this year, but shares have rallied back following the EV giant's first-quarter earnings and revenue report on April 23. Now, shareholders appear set to reapprove Chief Executive Elon Musk's $56 billion pay package as the Tesla head is focused on restructuring the company for the "next" growth phase.
↑X Tesla Is Struggling. Here's What Elon Musk Is Betting On For Future Growth. See All Videos
Tesla holds its annual shareholder meeting after the market closes on Thursday. Musk couldn't wait and posted to X late Wednesday that resolutions on his 2018 pay deal and reincorporation in Texas are "currently passing by wide margins."
The final tallies for the votes will be announced at Tesla's annual shareholder meeting. The vote on Musk's compensation requires a simple majority of votes, excluding those owned by Musk and his brother, Kimbal Musk. Meanwhile, the vote to reincorporate Tesla in Texas necessitates a majority of all shares outstanding, with any uncast votes counted as "no."
In the run-up to the meeting, there has been concern that Musk would leave the EV company or make moves to shift Tesla efforts and resources to his other companies if he was not awarded his pay package, which is currently valued at around $45 billion.
The vote comes after a Delaware judge ruled against the 2018 package, deciding that the package was excessive and unfair to Tesla investors. The judge criticized Musk's "extensive ties" with Tesla board members.
Delaware courts could still block a reapproved package.
Following Thursday's shareholder meeting, Tesla then reports second-quarter earnings in mid-July. The company will unveil its "robotaxi" on August 8.
As analysts await the official annual meeting vote results, updates around Tesla's strategy, new products and EV demand, the top question for investors is always, when is it a good time to buy or sell Tesla stock.
Cathie Wood Bets On Robotaxi
Meanwhile, Cathie Wood and her Ark Invest firm on June 12 updated its Tesla stock price target to 2,600 by 2029. Wood has long been bullish on Tesla's autonomy push and robotaxi aims.
Ark Invest estimates that around 90% of Tesla's enterprise value and earnings will be attributed to the robotaxi business in 2029.
Without a robotaxi network and business, Ark Invest says its TSLA price target would be around $350 per share, according to the report.
"We remain confident that the service will launch within the next five years," Ark Invest said.
JPMorgan analysts on Tuesday said they expect Tesla to show off a robotaxi prototype. However, actual robotaxi revenues could be years away. That followed discussions with Tesla investor relations team.
Musk And Tesla Control
CNBC reported on June 4 that in December Musk had Nvidia (NVDA) send AI processors, earmarked for the EV giant, instead to his social media enterprise X, formerly Twitter, which Musk purchased in October 2022.
Musk has hinted throughout the year he feels he needs more TSLA shares and voting power before making Tesla a "leader in AI & robotics."
In January, Musk posted on X that he's "uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control." The chief executive added that he wants enough shares to be "influential but not so much that I can't be overturned."
"This is primarily about ensuring the right amount of voting influence at Tesla," Musk said. "At 15% or lower the for/against ratio to override me makes a taker by dubious interests too easy."
Adam Jonas, Morgan Stanley's high-profile autos analyst and a Tesla bull, wrote on June 4 that if Musk does not achieve a 25% voting stake in the EV giant, "Tesla shareholders should be prepared for Tesla to significantly slow down/curtail its direct investment in sensitive/advanced AI efforts."
"While Tesla may still be in position to benefit indirectly from AI advancements, we believe that most of the adjacent AI efforts could be concentrated within non-Tesla entities where Elon Musk has control," Jonas added.
Musk currently has a nearly 13% stake in Tesla. Prior to selling TSLA shares to purchase Twitter, now X, for $44 billion in late 2022, Musk owned around 22% of Tesla.
Tesla Stock Rallies Following Q1 Earnings
Tesla reported worse-than-expected first-quarter earnings and revenue late on April 23. Investors appeared not to care, sending TSLA shares jumping 12% the following day after 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.
Ahead of first-quarter earnings , TSLA shares had fallen more than 17% in April, hitting a 52-week low of 138.80 on April 22. Investor sentiment seemed downcast. However, Tesla stock began rallying immediately following Q1 results. As of June 12, Tesla stock is up around 20% since Q1 earnings.
With Musk focused on FSD and artificial intelligence, he is also shaking up Tesla, letting top executives go and announcing layoffs.
Elon Musk, Layoffs And Superchargers
The Tesla chief decided to let two top executives go while also cutting the EV company's entire supercharger team, according to reports on April 30. However, since then he appears to have since started hiring back supercharger employees.
Following the decision, Musk posted to X that Tesla will spend more than $500 million to expand its supercharger network and "create thousands" of new chargers in 2024.
"That's just on new sites and expansions, not counting operations costs, which are much higher," Musk said.
In the first quarter, Tesla supercharger stations totaled 6,249, up 26% vs. Q1 2023. Compared to Q4, supercharger stations grew 5%, adding 297. Meanwhile, supercharger connectors increased 27% to 57,579 in Q1, with 2,687 additional connectors compared to the fourth quarter.
In late April, Musk dismissed Rebecca Tinucci, senior director of Tesla's supercharger efforts, and Daniel Ho, head of the new vehicles program. The Tesla CEO also reportedly cut teams under Tinucci and Ho along with laying off its public policy employees and the entire staff working on Tesla superchargers.
Musk decided in April to lay off more than 10% of Tesla's global workforce, an effort to prepare for the "next phase of growth." Drew Baglino, who served as senior vice president of powertrain and energy, and Rohan Patel, vice president of public policy and business development, both departed Tesla around the time of those cuts.
Tesla Stock Declines In 2024
So far in 2024, Tesla stock has retreated about 30%, trading along its 50-day moving average. With 2023 in the rearview mirror, Wall Street consensus has 2024 Tesla earnings firmly below last year's level.
That signals another year of earnings declines for this growth stock. Analysts currently expect Tesla earnings per share of just $2.41 in 2024, according to FactSet. That would be a 23% decline vs. $3.12 in 2023.
Wall Street's 2024 EPS consensus estimates for Tesla have come down 37% since the end of 2023. Looking further out, analyst consensus has Tesla's EPS in 2025 coming in at $3.29, down from the $5.29 projection at the end of 2023, according to FactSet.
Tesla Stock: Q1 Earnings
Tesla reported its lowest quarterly EPS since 2021 on April 23. Q1 earnings fell 47% to 45 cents per share. Meanwhile, quarterly revenue totaled $21.3 billion, down 9% vs. Q1 2023. Analysts projected Q1 earnings falling more than 42% to 49 cents per share with sales declining nearly 5% to $22.22 billion.
The EV giant said its Q1 revenue decline was primarily due to a reduced average vehicle selling price and a drop in vehicle deliveries. Tesla added revenue was also hindered by issues with the Model 3 refresh rollout at its Fremont factory.
Total gross margins came in at 17.4%, down 199 basis points compared to Q1 2023. Meanwhile, Tesla ended the first quarter with a global vehicle inventory of 28 days, up 87% compared to Q1 2023.
Low Cost Vehicles Upcoming?
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 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 said following earnings.
Tesla Stock: Musk Predicts Higher 2024 Vehicle Deliveries
Musk added 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 said at the time.
Musk Optimistic About Q2
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%.
Analysts predict global Q2 Tesla deliveries will total 444,000 vehicles, according to analyst consensus. That would be down around 4% compared to last year's 466,140 deliveries. Tesla hit a record 484,507 deliveries in Q4 2023.
"We think Q2 will be a lot better," Musk said on the earnings call.
Next-Generation Platform, The Robotaxi And Ride Share
Musk and Tesla have been stepping up rhetoric about Full Self-Driving and AI. That messaging was on full display during the company's first-quarter earnings call.
Tesla 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."
Jensen Huang On Tesla
Nvidia Chief Executive Jensen Huang recently talked up Tesla's autonomous driving, claiming the EV giant is "far ahead" on self-driving vehicles and that all cars will eventually have autonomous abilities.
Tesla along with Elon Musk are major customers of Nvidia.
Nvidia on its Q1 earnings call mentioned myriad automotive customers working on AI self-driving, including several China EV players. Nvidia reported that revenue from automotive was $329 million, up 17% sequentially and up 11% year-on-year. The company added that this increase was primarily due to its "self-driving platforms."
Chief Financial Officer Colette Kress said on the earnings call that Nvidia "supported" Xiaomi to launch its first electric vehicle, the SU7 sedan, which is posing a serious threat to the Tesla Model 3 in China.
Kress added that its updated AI car computer software, Nvidia Drive Thor, is slated for production in vehicles in 2025. Customers include BYD (BYDDF), XPeng (XPEV) and others.
"We expect automotive to be our largest enterprise vertical within data center this year," Kress said.
Tesla Stock: AI Gold Rush
On April 28, Musk doubled down on X that Tesla will spend around $10 billion in 2024 in "combined training and inference AI, the latter being primarily in car."
"Any company not spending at this level, and doing so efficiently, cannot compete," Musk said.
The Tesla chief also confirmed on the Q1 earnings call that the company will be "showcasing" its robotaxi, or "cybercab," on Aug. 8. Musk added 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 believes 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.
Are Hybrids Stealing The Future From EVs?
Tesla Momentum, Competition In China
Tesla ended 2023 on a high in China. However, the EV dynamic in China could quickly change. Musk has said China's EV companies are Tesla's main competition — with BYD, Nio (NIO), Li Auto (LI) and others all making inroads in the EV market.
BYD, already far above Tesla EV sales including plug-in hybrids (PHEVs), overtook its U.S. rival in global BEV deliveries in the fourth quarter of 2023. Warren Buffett-backed BYD has also decided to open a plant in Europe, moving onto Tesla's turf on another continent. BYD already is building plants in Thailand and Brazil.
However, Musk and Tesla appear to be changing it up. The EV giant recently won tentative approval for introducing Full Self-Driving in China after Elon Musk made a surprise visit to the country at the end of April.
Wedbush analyst Ives wrote that Musk's visit to China was a "home run." Ives added that the Tesla chief's ability to win FSD approval in China is a "watershed moment for the Tesla story."
In Q1, Tesla sold 132,420 vehicles in China, about 34% of its global deliveries.
China And Q2 Deliveries
Through ten weeks in the second quarter, Tesla China insurance registrations are up around 14% compared to the seasonally slow first quarter. However, registrations remain down about 7% vs. the same time frame in 2023.
Meanwhile, Tesla China deliveries in May came in at 72,573, down 6.6% vs. a year earlier and up 16.7% vs. April.
Th U.S. EV company sold 55,215 vehicles in China in May, up 30% vs. May 2023, according the China Passenger Car Association (CPCA). Tesla sold 15,230 Model 3 vehicles during May in China, marking a 33% year-on-year increase.
The company's Model Y deliveries in China jumped 29% in May compared to a year ago.
EU China EV Tariffs
On June 12, the European Union announced it provisionally will impose additional tariffs of up to 38.1% on Chinese EVs starting in July, on top of the current 10% duties. Specifically, a 17.4% tariff will imposed on EV giant BYD, 20% on Geely, which owns Zeekr (ZK) and 38.1% on state-owned SAIC.
For other automakers, they'll receive an average duty of 21% if they cooperate and 38.1% if they do not.
Tesla, which exports the Model 3 and some Model Y vehicles from its Shanghai plant to Europe, also is affected. The EV giant expects to increase the price of its Model 3 of the E.U. import duties.
Tesla EVs In Regulators' Sights
The EV giant also faces mounting pressure from regulators in 2024. A Reuters investigation found the EV giant has known of faulty suspension and steering parts across its model lineup going back at least seven years, but often blamed drivers when those parts failed.
Norway's traffic safety regulator in late 2023 confirmed it's been investigating suspension failures in Model S and X vehicles since September 2022. Sweden also announced on December 22, 2023 that it's also looking into similar issues.
This comes after a National Highway Traffic Safety Administration (NHTSA) investigation spurred Tesla to perform an over-the-air software "recall" on more than 2 million vehicles after determining that the Autopilot is prone to misuse after reviewing 1,000 accidents.
The NHTSA recently closed its Autopilot safety probe. However it has opened a new investigation into whether the over-the-air update was sufficient.
Is Tesla Stock A Buy?
Tesla stock has retreated about 30% in 2024. However, since Tesla reported first quarter earnings and revenue on April 23, it has rallied and is finding support at its 50-day moving average, according to MarketSurge analysis. Tesla stock hit a 52-week low of 138.80 on April 22.
Tesla Stock Has Plunged In 2024, But At Least It's Cheaper, Right? Nope
TSLA shares dropped below its 50-day moving average for the first time since May 13 on June 11 but reclaimed that key level on June 12. The stock remains well below its 200-day moving average.
Tesla stock ranks seventh in the 35-member IBD Auto Manufacturers industry group. The stock has a weak 44 Composite Rating out of a best-possible 99. Shares have a 17 Relative Strength Rating and a 61 EPS Rating.
Almost single-handedly, Elon Musk has turned the auto industry on its head. He has essentially forced it to get aboard the electric-vehicle train. It's a reason why Tesla has been a monster stock over much of its history, especially during its stratospheric run from mid-2019 to late 2021.
Tesla stock has had mammoth runs and could again. But it's not a buy right stock now.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
YOU MAY ALSO LIKE:
Get An Edge In The Stock Market With IBD Digital
Is Rivian Stock A Buy Right Now?
Stocks Near A Buy Zone
Learning How To Pick Great Stocks? Read Investor's Corner
