Late on Tuesday, Tesla (TSLA) released lower-than-expected revenue and profitability for the first quarter. TSLA shares surged 12% on Wednesday as Chief Executive Elon Musk hinted that “more affordable” new models are on the horizon, but investors didn’t seem to care. During the conference call, Musk emphasized Tesla’s work on full-self driving (FSD) and also forecasted a rise in vehicle deliveries by 2024.
Tesla’s stock had dropped more than 17% in April before the company announced its first-quarter earnings on Tuesday. On Monday, the stock reached a 52-week low of 138.80. Investor mood appeared depressed. However, as soon as the Q1 data were announced, Tesla stock started to rise. These are the explanations behind why.
Low-Cost Car on the Way
Prior to the company’s results release, rumors circulated that Tesla had shelved or otherwise redirected its intentions to build the $25,000 next-generation Model 2.
But according to Tesla, it has revised 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.”
According to Tesla, these new cars would “use aspects of the next generation platform as well as aspects of our current platforms” and include “more affordable models.” According to Tesla, these new cars could be produced on the same assembly lines as its existing range of automobiles.
The new model line will launch early in 2025, Musk stated during the earnings call, “if not late this year.”
Executives declined to provide any further information regarding the company’s plans for affordable cars.
Longtime Tesla bull Dan Ives, an analyst at Wedbush Securities, said on Wednesday that it looks like Tesla is choosing to go with a “Model 2.5” rather than 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 stated.
Tesla Stock: Musk Expects Increased Auto Deliveries in 2024
During the results call, the CEO of Tesla also stated that he anticipates a rise in vehicle deliveries in 2024 over 2023. Deliveries to the massive EV company reached a record 1.81 million in 2023. The desire for EVs does seem to be declining this year, though.
Despite producing 433,371 vehicles, Tesla stated in early April that its first-quarter global deliveries came to a total of 386,810. A total of 369,783 Model 3 and Model Y units as well as 17,027 “other” cars were delivered.
With 386,810 deliveries in Q1, Tesla beat even the most optimistic projections and had its lowest quarterly delivery total since 344,000 in Q2 2022. Analysts have revised lower delivery forecasts ever since.
Adam Jonas, an analyst at Morgan Stanley, said on Wednesday, “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.”
In the meantime, Tesla’s global vehicle inventory at the end of the first quarter was 28 days, an 87% increase from Q1 2023. Exceeding predictions of 15.9%, auto gross profit margins, excluding regulatory credits, reported at 16.4%.
Next-Generation Platforms: Ride Share and Robotaxi
On Tuesday, Musk and Tesla did not stop praising FSD, autonomy, and artificial intelligence.
Additionally, Tesla recently switched from FSD Beta to supervised FSD for complete self-driving. Regulating papers revealed that the EV behemoth will record $281 million in deferred sales by the end of Q1.
“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 stated during the results conference call.
He subsequently stated that “if somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor in the company.”
The CEO of Tesla also said that the company will be “showcasing” its robotaxi, or “cybercab,” on 8 August and that further discussions on a low-cost vehicle will take place thereafter.
In the first quarter, Tesla’s free cash flow was negative by $2.5 billion due to its $1 billion expenditure on “AI infrastructure.”
Additionally, the firm announced that it will “continue to increase” the capacity of its AI infrastructure in the “coming months” and that it is now developing ride-hailing features that will be “available in the future.”
This may put Lyft (LYFT) and Uber (UBER) in competition with Tesla.
According to Jonas, Tesla wants to provide autonomous ride-hailing cars in the long run. He stated this on Wednesday. According to Jonas, it would first depend on “human-supervised FSD” from a mix of Tesla owners and a Tesla-owned fleet.
Performance of Tesla Stock
TSLA stock fell by about 0.5% in the early going on Thursday. During Wednesday’s trading, Tesla’s stock increased by 12% to 162.13, reaching an intraday high of 167.97. On Monday, TSLA’s shares dropped 3.4% to 142.05, with an intraday low of 138.80.
Tesla’s stock has increased by over 10% so far this week. Still, the stock is down roughly 7.8% for April.
Tesla’s shares fell 14% last week, surpassing lows from April 2023.
Within the 35-member IBD Auto Manufacturers industry group, Tesla’s stock is ranked eighth. Of a possible 99, the stock has a Composite Rating of 28. In addition, Tesla’s stock has a 63 EPS rating and a 14 relative strength rating.