TSLA Plummets This Week ? Think so !
As the US earnings season will head into its 3rd week, all eyes will mainly be on 2 stocks this week - $Tesla Motors(TSLA)$ and $Amazon.com(AMZN)$.
Both will be reporting their third quarter earnings respectively on:
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Wed, 23 Oct 2024 - after market close for Tesla.
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Thu, 24 Oct 2024 - after market close for Amazon Inc.
Hopefully, US market hopefully will only be jittery about these 2 stocks and not overall (fingers crossed).
Other notable companies reporting their earnings include :
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$GE Aerospace(GE)$ - Tue, 22 Oct 2024. Interesting to find out if GE will outperform Boeing.
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$Verizon(VZ)$ - Tue, 22 Oct 2024.
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$Coca-Cola(KO)$ - Wed, 23 Oct 2024.
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$IBM(IBM)$ - Wed, 23 Oct 2024.It’s quantum computing progress.
This post’s focus will squarely be on Tesla (only).
Q2 Earnings Recap.
Tesla’s Q2 2024 earnings declined YoY and missed Wall Street’s estimates.
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Earnings per share (EPS) Non GAAP : $0.52 vs $0.62 expected by LSEG vs $0.92 (Q2 2023).
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Revenue: $25.50 billion vs. $24.77 billion expected by LSEG vs $24.92 (Q2 2023).
What was disconcerting, was automotive revenue dropped -7% YoY to $19.9 billion from $21.27 billion.
In the Q2 financial results, although sales exceeded expectations, both operating income and earnings per share (EPS) declined by double digits.
Revenue Breakdown.
An important fact about Tesla is its different revenue streams.
Besides EV sales, Tesla also makes money from (a) services + other and (b) energy generation + storage.
Over time, it is these other revenue streams that are adding to the company’s bottom line instead of its aged EV models’ sales. (see above)
Stock Price.
The month of October 2024 has an impact on Tesla’s stock price. (see above)
(1) On 02 Oct 2024 - Tesla announced its Q3 EVs delivery.
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Total production : 469,796.
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Total deliveries : 462,890 vs FactSet’s estimates of 463,310.
By other analysts’ estimates, Tesla “failed” even more in its delivery. For example, according to LSEG, analysts expected the car maker to deliver 469,828 EVs.
As a result, the stock fell as much as -3.7% after the report. (see above)
(2) On 10 Oct 2024 - Tesla unveiled its robotaxi - Cybercab.
The lacklustre “We, Robot” event failed to capture the audience’s imagination, despite Mr CEO fulfilled his dream of showcasing an autonomous EV without steering wheel and pedals.
As usual, the unveiling was (i) short on details and (ii) long on expected-delivery date of before 2027.
Although priced at an affordable $30,000 - the Cybertruck saga has taught everyone that when it comes to Tesla’s pricing, and technical specifications nothing is firmed until closer to delivery date.
That is when Tesla’s customers (buyers) will be caught in a lurch.
This time, no one is buying Mr CEO’s assertive assumptions, after he has “cry wolf” one time too many.
Tesla shares closed down nearly -9% on Fri, 11 Oct 2024.
As of Fri, 18 Oct 2024, the shares finished at $220.70. They're still down -7.6% from 10 Oct 2024 and off -15.6% for the month.
Since that day, Tesla’s share has lost its momentum and pull back to September 2024 price.
All gains made thus far, have been wiped out in a short span of one week.
Q3 2024 Forecast.
Taking into considerations the massive price slash discount, the higher costs of production etc.. Wall Street has the following forecasts:
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Earnings per share (EPS) non-GAAP : $0.58 per share. It will be a -12.12% YoY fall from $0.66 (Q3 2023).
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Revenue : $25.674 billion. This will be a +9.95% YoY gain from $23.35 billion (Q3 2023).
More Bad News.
Tesla has just hit with another road blocker. (see above)
On Fri, 18 Oct 2024, the US Federal auto regulators -National Highway Traffic Safety Administration (NHTSA), has opened an investigation into 2.4 million Tesla EVs equipped with the car maker's Full Self-Driving (FSD) software.
This arose after four reported collisions, including a fatal crash that resulted in the death of a pedestrian in Rimrock, Arizona, in November 2023, after being struck by a 2021 Tesla Model Y.
Preliminary investigation will focus on whether the “camera (only) approach & technology” used in Tesla’s autonomous driving is sufficient to safely steer the EV in low-visibility conditions like heavy rain, sun glare, fog, or dust.
GlobalData, VP, Jeff Schuster has commented:
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Weather conditions can impact a camera's ability to see things.
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Making matters worse is Tesla’s overall auto driving implementation, does not have backup sensors.
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He thinks the regulators will be strict about this.
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And this could delay the robotaxis approval license & launch.
Overall Revisions.
Wall Street consensus has 2024 Tesla earnings firmly below last year's level.
This will mean another year of earnings declines for Tesla.
For FY 2024, according to FactSet, analysts expect Tesla’s earnings per share to be just $2.24.
This would be about a -30% YoY decline vs. $3.12 in FY 2023.
Year Delivery & Target Price.
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Piper Sandler, MD & Snr research analyst (Transport technology), Alexander Potter expects delivery to slip by -0.5% to south of 1.8 million EVs.
He has cut target price to $205 per share.
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Jeffries, MD & Equity research analyst, Philippe Houchois foresee a -3% fall on delivery to 1.77 million EVs. He has cut target price, drastically to $165.
My viewpoints: (mine only)
Mr CEO is too distracted and busy enjoying his solo campaign trail to canvas votes for ex-president D. Trump to be bothered with running his chain of companies.
He just craves for the spotlight to shine on him for a wee bit longer.
He isn’t too bothered about the Federal auto-regulators investigation into Tesla’s autonomous driving eco-system.
Worst case scenario:
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Reinstate the use of Lidar to Tesla’s auto-driving system.
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Rewrite the auto-driving software to process and integrate Lidar’s data assessment into its driving decision-making process.
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Most important, pass on the additional costs to Tesla car owners.
With $56 billion in his pocket, even if Tesla and X (formerly Twitter) file for Chapter 11 (not that Tesla would in the near term), Mr CEO still has the means to pursue his interests, many times over.
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Do you think Tesla will hand in a stellar earnings report on Wednesday evening ? Don’t count on it.
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Do you think it is prudent to sit on the fence and watch the Tesla drama unfold before deciding to jump in ?
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