January 30, 2023

Next up for Elon Musk: Crucial Tesla earnings and outlook

3 min read

New York

Tesla is expected to report record earnings after the bell on Wednesday, but that may not be enough to appease worried investors.

The company is facing growing doubts about its business after disappointing sales and declining prices of its cars worldwide.

“I don’t think Q4 matters other than what it means for Q1,” said analyst Gordon Johnson, one of Tesla’s staunchest critics. “What’s going to happen in the end is guidance.”

Analysts surveyed by Refinitiv forecast that both fourth-quarter revenue and full-year revenue will be higher than a year ago, and the company is likely to hit a record. That’s good news after two quarters in which Tesla’s profits fell short of previously high numbers.

But on January 2, the company revealed Disappointing fourth quarter salesYet Price reduction announced in December. A subsequent further price cut in January has raised concerns that the company is facing a slowdown in demand for its products. U.S. buyers are now paying $44,000 for the base version of the Model 3, down $3,000 from what they were paying at the end of November.

That gives any guidance on future sales and profit margins that Tesla and its controversial CEO Elon Musk made particularly important on Wednesday, especially for its once-high-flying stock. after the. 65 percent fell last year.

Shares have nevertheless recovered so far this year. sink 12% — their biggest one-day decline in two years — on the first trading day of 2023, in response to fourth-quarter sales. Shares closed up 17 percent year-to-date on Tuesday.

But disappointing guidance on future sales and profits on Wednesday could sink shares sharply. And there is plenty of reason to be concerned.

“Are they going to rip off the Band-Aid and say they’re no longer going to increase their sales by 50 percent? And how bad are the margins going to look?” said Dan Ives, tech analyst at Wedbush Securities.

Ives recently lowered his Tesla price target to $175 from $250.

Through the first half of last year, Tesla insisted on that It can still increase its annual sales by 50%. Despite the fact that its Shanghai factory and most of its Chinese sales were closed due to the Covid outbreak.

It wasn’t until the company reported its third quarter results. Abandoned its 50% growth target for 2022.. But investors weren’t prepared for how badly it would miss that mark. Fourth-quarter sales left it with full-year growth of just 40%.

Ives said he thinks a 35% growth target going forward is more realistic given the increased competition. From traditional car makers to electric vehicles. He also believes that Tesla will have to do something clearer on profit margins, given that recent price cuts will reduce the revenue it expects to make per vehicle. But Johnson said he thinks Musk and Tesla will continue their tradition of making overly ambitious promises.

“The idea that Tesla will lead you to anything close to reality is unlikely because Elon Musk has a pathological problem with telling the truth,” Johnson said.

In addition to providing guidance on sales and profit margins, Ives said it’s important that Musk reassure investors about the non-operational issues that have become headwinds for Tesla shares over the past year.

Musk has spent the first two days of this week. Testifying in a federal trial On his 2018 tweet that he had “secured funding” to take Tesla back private when it was still losing money and facing a cash crunch.. It turned out he didn’t have the funding secured, though he defended the tweet again in testimony this week, saying he believed Saudi investors were willing to back a deal that never happened. .

And most of the news in the last nine months has been about him. Musk bought Twitter for $44 billion. And its sale Tesla stock is worth about $23 billion To help fund this purchase. Some of those sales came after Musk announced on Twitter that he had sold Tesla shares.

“There’s been a lot of hype over Tesla stock, from Twitter, to the court case, to the stock sale,” Ives said. “It would help if Musk said on the conference call that he would no longer be selling the stock.”

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