By Paul R. La Monica
A children's book about Tesla stock in the first few months of 2024 could have the title Elon and the Terrible, Horrible, No Good, Very Bad Year. The shares have plunged more than 40% as investors worry about slumping sales, price cuts for electric cars around the globe, competition from hybrid vehicles, layoffs, and weak earnings.
But one analyst is confident that Tesla will soon turn things around, predicting that Elon Musk will be able to boast of an "I told you so" moment when it comes to fully self-driving vehicles, a much hyped "robotaxi" and its new Cybertruck. The title to that book could be How Elon Showed Up the Skeptics and Taught Wall Street a Lesson.
Tesla will report its first-quarter results after the closing bell Tuesday. Analysts are forecasting a nearly 5% slide in revenue and a 42% plunge in earnings per share.
"It's always easy to pile on when a stock is falling," said Daniel Newman, CEO of The Futurum Group, a research firm focusing on technology. "But the biggest catalyst is going to be Elon Musk's focus. After losing hundreds of billions of dollars in market cap, Musk's attention on Tesla has returned."
Newman thinks investors need to play the long game and not worry about the first-quarter results, which could wind up being disappointing. He argues that investments that will bolster self-driving vehicles will pan out over the next few years. Newman said that Tesla will be able to generate a significant chunk of revenue from software updates.
"Even if there's a selloff if Tesla misses its numbers this week, it might be the moment where the market is giving up but buyers will want to jump back in," Newman said.
Musk has also promised that on Aug. 8, Tesla will unveil its robotaxis, autonomous cars that will be able to earn money for their owners by using their self-driving capabilities to pick up passengers. Technology like that could basically make Tesla owners into a mini- Uber or Lyft.
"Tesla is a software and AI play, not just a car play. Musk has to pound that point home," Newman said. "Focusing on full self-driving and robotaxis is a way to return the company to a technology leadership position. Tesla is a mobile operating system with an electric motor."
Newman isn't necessarily arguing that Tesla will get back to its vaunted $1 trillion market valuation soon. The company is now worth "only" about $455 billion. Even at that price, Tesla still trades at more than 55 times the per-shares earnings expected for 2024, and more than 4.5 times revenue forecasts.
Analysts are cautiously optimistic that the worst may soon be over, however. The consensus price target for Tesla is $189.11, according to FactSet. That implies around 35% upside from current levels.
Nor is Newman as bullish as Cathie Wood of ARK Invest, a longtime Tesla investor who thinks the stock could eventually hit $2,000, for a surge of nearly 1,300% from its current price. "I'm not suggesting I'm Cathie Wood. But I think Tesla is oversold now given its market share," he said.
Christopher Tsai, president and chief investment officer of Tsai Capital, an investment management firm that owned nearly 130,000 shares of Tesla as of the end of December, agrees with Newman.
"Misunderstood by much of Wall Street -- and consequently a favorite of short sellers -- Tesla continues to grow and increase its lead over the competition while delighting consumers in the process," Tsai said in an email to Barron's.
"Tesla has experienced periods of slowing growth in the past, but these periods proved to be temporary. We expect the company's growth to accelerate once again," Tsai added.
The results on Tuesday may not convince investors that a turnaround is imminent. But the Tesla faithful are confident that Musk will eventually prove the naysayers wrong. Again.
Write to Paul R. La Monica at paul.lamonica@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 22, 2024 14:47 ET (18:47 GMT)
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