Tesla Stock Analysis: Insights and Future Projections

Tesla stock analysis

So far, in 2024, Tesla, Inc. (NASDAQ: TSLA), renowned as the world's premier electric vehicle manufacturer, finds itself in turbulent waters, diverging from its historical dominance in the electric and technology realms. Spearheaded by Elon Musk, Tesla transitioned from the niche high-end sports car market to a more inclusive range of vehicles.

The pioneering Roadster paved the way for subsequent successes like the Model S, Model X, Model 3, and Model Y. 

Despite its esteemed status within the S&P 500 and the illustrious "Magnificent Seven," Tesla's stock performance this year has been dire. It plummeted by nearly 40%, making it the index's worst performer. Recent setbacks, including announced layoffs and a rare decline in annual vehicle deliveries, have compounded this downward trajectory.

Amidst these challenges, Tesla's shares have continued to tumble, experiencing an additional 14% selloff last week as the company prepares to release its first-quarter earnings on Tuesday, April 23, after the market closes. 

Current Trends Affecting Tesla Stock

The U.S. electric vehicle (EV) market is slowing down, with Q1 2024 sales totaling 268,909 units, down from the previous quarter, according to the Kelley Blue Book EV sales report. Annual growth has notably decreased, with Q1 sales up only 2.6%, in contrast to last year's rapid increases. 

Tesla's U.S. sales dipped by 13.3% year over year, departing from its usual double-digit growth trend. As a result, Tesla's share of the EV market in the U.S. has dropped to 51.3% from 61.7% the previous year. As more options enter the market, with several global brands switching to electrification, Tesla is feeling demand pressure. However, despite this, manufacturers like BMW, Cadillac, Ford, Hyundai, Kia, Lexus, Mercedes, Rivian, and Vinfast experienced over 50% year-over-year growth in EV sales.

This trend and market dynamics shift has impacted Tesla's performance, contributing to its stock downturn.

Despite its recent lackluster market performance, Tesla continues to showcase its commitment to technological innovation. Recently, the company disclosed details about its humanoid robot technology, unveiling several new patents related to its Optimus robot program.

A few months ago, Tesla introduced "Optimus Gen 2," a significant advancement in its humanoid robot series designed to automate repetitive tasks. This new prototype demonstrated substantial improvements over previous versions, instilling renewed credibility in the project.

Tesla's global expansion strategy, including negotiations with Indian Prime Minister Narendra Modi to establish a Gigafactory in India, reflects its proactive approach. This move mirrors Tesla's expansion into the Chinese market with the Shanghai Gigafactory, enhancing its presence in Asia.

The proposed introduction of the low-cost Model 2 EV could revolutionize the Indian market, which has been relatively slow in adopting electric vehicles.

Financial Performance Review of Tesla


Tesla's fourth-quarter earnings report, released on January 24, fell short of analysts' expectations, with revenue and profit for the fourth quarter missing estimates. Automotive revenue only saw a modest 1% increase from the previous year. Adjusted earnings per share were reported at 71 cents, below the expected 74 cents expectation, while revenue totaled $25.17 billion, slightly lower than the anticipated $25.6 billion. 

Despite a 3% increase in total revenue compared to the previous year, the operating margin dropped to 8.2% from 16% in the year-ago quarter. Tesla highlighted in its investor presentation that vehicle volume growth in 2024 might significantly lag behind last year's growth rate as the company focuses on launching its "next-generation vehicle" in Texas. Additionally, Tesla cautioned investors that it is currently navigating between two major growth waves.

For the full year, Tesla reported automotive revenue of $82.42 billion, marking a 15% increase from the previous year. Though smaller than the core business, the energy division showed remarkable growth, with revenue soaring by 54% to $6.04 billion. This division focuses on selling solar energy generation and energy storage systems.

Additionally, Tesla's "Services and Other" revenue experienced a notable uptick, rising by 37% to reach $8.32 billion compared to the previous year.

Ahead of the company’s first-quarter earnings release, scheduled for Tuesday, April 23, it is trading at a price-to-earnings (P/E) ratio of 36.07 and a forward P/E of 40.03. 

Comparative Analysis with Competitors

Compared to major traditional automakers like General Motors(NYSE: GM) and Ford(NYSE: F), Tesla's market performance appears to lag. GM boasts an attractive price-to-earnings (P/E) ratio of just 5.8 and has seen its stock climb by nearly 18% on the year, indicating a strong performance and uptrend. On the other hand, Ford offers an above-average dividend yield of almost 5% and a P/E ratio of 11.24, with a modest 1% year-to-date increase in its stock. In contrast, Tesla's market performance falls short, with sentiment notably more bullish on traditional automakers. 

GM holds a Moderate Buy rating based on analyst ratings, with a consensus price target suggesting almost 22% upside potential. Ford, with a Hold rating, forecasts a nearly 14% upside according to consensus estimates. GM and Ford's ratings and overall sentiment are significantly healthier than Tesla's Reduce rating, indicating a more favorable outlook for traditional automakers among analysts. 

How does Tesla's market performance in the current year compare to that of other prominent pure EV manufacturers in the U.S., such as Rivian(NASDAQ: RIVN) and Lucid(NASDAQ: LCID)?

While Tesla secured a substantial 51.3% segment share of EV sales in the first quarter, Rivian held 5% of the U.S. market share, with Lucid at 0.7%. Notably, Rivian emerged as the third-largest EV manufacturer in the U.S. by sales in the first quarter, trailing only Tesla and Ford.

Regarding market performance, both Rivian and Lucid have significantly trailed behind the overall market and even Tesla this year. Rivian's shares have plummeted by 63%, while Lucid's have dropped by almost 42%. Comparing these two smaller EV companies to Tesla wouldn't be equitable, given Tesla's colossal market capitalization of $500 billion, dwarfing Lucid's $5.64 billion and Rivian's $8.44 billion.

Additionally, Rivian's recent quarterly sales amounted to $1.32 billion, and Lucid's to $157.2 million, wildly contrasting to Tesla's $25.17 billion.

Future Projections for Tesla Stock

Recent data reveals analysts' shift from a Hold to a Reduce rating, a downgrade from its previous rating. This rating places Tesla below the consensus rating for other auto companies, which remains at Hold, and the S&P 500 consensus rating, which is also rated Hold.

Over the past several weeks, there has been a notable trend of analysts revising their price targets and rating for Tesla. Notably, analysts at JPMorgan slashed its target from $130 to $115, Wells Fargo reduced theirs from $125 to $120, and on April 10, analysts from Jefferies Financial Group adjusted their target from $185 to $165. 

Despite recent downgrades and prevailing bearish sentiment, Tesla's consensus price target is still significantly above its current stock levels. At $197.15, analysts foresee an impressive 27% upside potential. Analysts expect the company’s EPS to fall slightly for the full year in 2024, forecasting an almost 13% rise in revenue. 

Tesla’s price target isn’t the only thing that’s been cut. The EV giant, amid shifting dynamics in the electric vehicle market and potential demand challenges facing Tesla, made a significant announcement over the weekend regarding further price cuts for EVs in the U.S., China, and Europe, alongside reductions in the price of Full Self-Driving (FSD) capabilities.

This move marks the latest shift in Tesla's pricing strategy. Notably, Model Y now begins at $42,990 before incentives and excludes taxes and fees, while the entry price for Model S stands at $72,990 and Model X at $79,990. Model Y and Model X are eligible for IRA credits of $7,500. However, prices for the Tesla Cybertruck and Model 3 remained unchanged.

Investment Considerations for Tesla Stock

While Tesla's stock presents enticing opportunities for investors with its pioneering position in the electric vehicle market and ongoing technological innovations, some inherent risks and uncertainties warrant consideration. Challenges such as intensified competition could impact Tesla's stock price.

Moreover, fluctuations in consumer demand and geopolitical tensions may influence investor sentiment and market dynamics. However, Tesla's strategic initiatives, including global expansion plans and continued focus on innovation, offer potential for long-term growth. With its dominant market position and visionary leadership, Tesla remains an intriguing investment prospect for those willing to navigate the evolving landscape of the electric vehicle industry.

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