Live updates: Tesla misses profit forecasts, shares slide ahead of earnings call

Tesla missed forecasts for its revenue and earnings over the last quarter, sparking a small selloff in after-hours trading.

Shares were down nearly 4% immediately after the carmaker posted its financials for the fourth quarter. Those losses eased to around 3% in the half hour after it reported earnings.

Including the decline after Wednesday's closing bell, Tesla shares are down 19% year-to-date. The stock is now underperforming the S&P 500 after a spectacular 2023, when Tesla shares more than doubled.

Fourth Quarter Results

• Adjusted EPS: $0.71, estimate $0.73
• EPS $2.27
• Basic EPS $2.49
• Revenue: $25.17 billion, estimate $25.87 billion
• Free cash flow: $2.06 billion, estimate $1.45 billion
• Gross margin: 17.6%, estimate 18.1%
• Capital expenditure: $2.31 billion, estimate $2.32 billion

Source: Bloomberg

All eyes will be on Tesla's profit margins in the new year, according to Deepwater.

"For Tesla earnings it's all about the margins. While I expect a slight improvement over the quarter, I believe the outlook for margins in 2024 will be for stabilization, not expansion," strategists said in a note.

Profit margins could rise back above 20% by 2025. Meanwhile, deliveries could surge from an expected 17% growth this quarter to 24% in that timeframe, strategists estimated.

Tesla still has long-term growth potential. Just look at the company's rising pace of production and deliveries, CFRA senior stock analyst Garrett Nelson said in a note.

Last year, Tesla's deliveries surged 38% and production rose 35% to notch 1.8 million units.

"We view the upcoming release as positive and remain bullish on Tesla even after the stock's stellar performance in 2023, expecting the company to benefit from declining unit costs (particularly plummeting battery costs) and introduce its long-promised mass market EV model later this year," Garrett said.

Electric vehicle demand is bound to soften over the next year. Tesla will have to choose whether it will continue to slash the prices of its cars to remain competitive, or keep its prices stable in 2024, Wedbush analysts said.

Price cuts on some of Tesla's models have paid off so far. Last year, Tesla's stock more than doubled, partly because discounts boosted sales in China.

"Which pricing path Tesla takes will be foundational move for the future of Tesla over the coming years in our view. This will be key focus for the Street tomorrow night to gauge what Tesla anticipates for 2024 around consumer demand globally," the firm said in a note. 

Tesla's growth potential over the long-term is promising, but the company faces key risks in the short-term, Goldman Sachs said. 

"Key downsides to our view relate to potentially larger vehicle price reductions than we expect, increased competition in EVs, delays with products/capabilities like FSD/the third generation platform," strategists warned.

The bank also cited Tesla's "internal control environment," profit margins, and its "high degree of vertical integration" as key risks.

Morgan Stanley says an imbalance of EV supply and demand which could weigh on Tesla this year. Though the world's supply of electric vehicles is on the rise, demand looks to be weakening, analysts said, pointing to indicators like Tesla's price cuts in China, fewer vehicles qualifying for tax incentives, and rental giants, like Hertz, cutting their supply of Teslas. 

"Looking ahead, are we approaching maximum market negativity on EVs? We believe the trough may happen towards the latter part of 2024," the bank said in a note, citing influences stemming from the EU Parliamentary and US presidential elections.

4th quarter

• Adjusted EPS estimate: $0.74
• EPS estimate: $0.62
• Automotive gross margin estimate: 18.5%
• Automotive gross margin ex-credits estimate: 17%
• Revenue estimate: $25.87 billion
• Free cash flow estimate: $1.45 billion
• Gross margin estimate: 18.1%
• Capital expenditure estimate: $2.32 billion
• Cash and cash equivalents estimate: $22.31 billion

1st quarter

• Automotive gross margin estimate 18.9%

Full-year 2024

• Production estimate: 2.14 million
• Deliveries estimate: 2.19 million
• Automotive gross margin estimate: 19.2%
• Capital expenditure estimate: $9.01 billion

Source: Bloomberg