Tesla Earnings: Declining Margins, 'Notably' Slower Growth, and Next-Gen EV in 2025
$Tesla(TSLA.US$'s shares experienced a decline in after-hours trading after the company's latest financial disclosures. The dip comes amidst a broader downward trend for the electric vehicle giant, with a 16% drop in share value this year, following a remarkable doubling in 2023.
Key Financial Figures
● Revenue: Achieved $25.17 billion against projections of $25.76 billion, a modest 3% climb from $24.3 billion in the previous year.
● Adjusted Earnings Per Share (EPS): Reported at 71 cents, surpassing the analysts' consensus of 62 cents, yet marking a 40% decrease from $1.19 the previous year.
Growth Challenges
In an attempt to stimulate sales last year, Tesla implemented a series of price cuts aimed at increasing sales volume. However, the company's growth has been tepid, with automotive revenue growing a mere 1% in the fourth quarter, a stark contrast to the substantial growth seen in past years.
Tesla now faces waning demand for electric vehicles and escalating competition from other EV manufacturers such as China's BYD. The company warned vehicle volume growth in 2024 "may be notably lower" than last year's growth rate.
Wall Street expects Tesla to sell 2.2 million vehicles this year, according to Visible Alpha. That would be up about 21% from 2023 but well below the long-term target of 50% that Musk set about three years ago. Tesla, however, did not reiterate that target on Wednesday.
Tesla's energy segment reported a 10% increase in revenue compared to the previous year, while services revenue surged, showing a 27% growth rate. Nonetheless, these gains were insufficient to significantly impact Tesla's overall sluggish sales growth.
Tesla's fourth-quarter revenue climbed by 3% to $25.17 billion, marking the slowest growth rate observed in over three years.
New Vehicle Production
On Wednesday, Tesla confirmed plans to commence production of a new mass-market electric vehicle, codenamed "Redwood," by mid-2025. This vehicle, along with a proposed entry-level car priced at $25,000, positions Tesla to compete with more affordable gasoline vehicles and a range of low-cost EVs, including those from BYD.
Tesla said it was in between two growth waves: one driven by the release of Models 3 and Y in 2017 and 2020, respectively, and a second wave that would start with the next-generation vehicle platform.
Margin Outlook
The company's net income for the quarter more than doubled to $7.9 billion, largely boosted by a one-time tax advantage. Yet, income from operations saw a 47% decline from the same period last year, and adjusted EPS fell by 40%.
Tesla noted that reduced raw material costs and government credits contributed to lower per-vehicle costs.However, investments in Cybertruck production and AI and other research initiatives inflated expenses.
The company's operating margin showed a slight improvement quarter-over-quarter, reaching 8.2% in the last quarter, but this was a decrease from the 16% seen in the fourth quarter of 2022.
Gary Bradshaw, a portfolio manager at Hodges Capital Management and Tesla shareholder, theorized that if vehicle volumes are expected to drop, Musk might implement further price cuts to capture market share, he cautioned that margins could remain under pressure for some time.
Source: MarketWatch, Reuters, WSJ
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Silverbat : Seems the dark period just started.
103963011 : It seems that are still many analysts that are still confident with the co though.