For Tesla investors, it was a quarter to forget. They won’t get a mental break though. First-quarter deliveries are due in a few days.
Tesla stock dropped almost 30% in the first three months of 2024 making it the worst-performing stock in the S&P 500. It’s the third worst quarterly drop ever for shares and the worst first-quarter drop—so Tesla stock just had its worst start to a year on record.
The two worst quarterly drops, interestingly, were the second and fourth quarters of 2022. Both were when CEO Elon Musk was buying Twitter, which is now called X.
Investors will hardly get any time to mull over the auto maker’s performance, caused by a combination of slowing demand growth for electric vehicles, more EV competition, and an aging product lineup with no lower-priced Tesla EV on the horizon. Even Tesla is saying investors should expect lower growth for a while. First-quarter delivery results are due on April 2.
Wall Street projects Tesla deliveries of about 457,000 units, according to FactSet. Investors, frankly, expect a lower number. Not all analysts update numbers at the same rate. The most recent estimates average about 425,000 units, up a hair from the 423,000 units delivered in the first quarter of 2023.
The most current estimates have fallen by about 35,000 units in recent weeks. Analysts, when cutting numbers, typically cite a lower-than-expected EV demand in China and some production problems in Fremont, Calif. Tesla has refreshed its Model 3 and the production ramp-up hasn’t gone as smoothly as expected. As for China, battery electric EV sales were up about 10% year over year in the first two months of the year. It is still growth, but not at the rate of prior quarters.
Earnings estimates reflect all of the first-quarter headwinds. Analysts now project 2024 earnings per share of just under $2.90 a share. At the start of the year, estimates were closer to $3.80. So estimates have fallen some 25% year to date, which isn’t too far off the stock’s year to date drop.
Looking ahead, investors will be relieved with a delivery number north of 420,000 units, says Wedbush analyst Dan Ives. His estimate for the first quarter is 425,000 units.
After deliveries, investors will want to hear how Musk plans to get the company through this rough patch. Part of that could include Tesla’s driver assistance technology called Full Self Driving, or FSD. Musk tweeted recently that his company would give all Tesla owners a free FSD trial for a month. That’s designed to boost the number of people who will pay $199 a month for the software that does most driving tasks most of the time. (Drivers still need to pay attention.)
“Higher FSD attach rates are also central to our investment thesis on the stock,” wrote RBC analyst Tom Narayan in a recent report. “Attach rates” is just his way of saying the number of Tesla owners buying FSD.
Narayan rates Tesla shares Buy and has a $298 price target for the stock. Ives rates Tesla shares Buy as well. His price target is $300.
They are more bullish than their peers. Overall, 33% of analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Tesla stock is about $200 a share.
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