Is TSLA's Q1 2025 EPS forecast a buying opportunity?


Aime
Tesla's Q1 2025 EPS forecast does not present a clear buying opportunity. Here's why:
- Soft Q1 Indicators: Tesla is expected to report a decline in quarterly deliveries for Q1 2025, with an estimated 377,000 vehicles delivered, which is a 8.5% year-over-year drop1. Additionally, the gross margin rate is projected to be 17.6%, and EPS is expected to decline to $0.46, the lowest since Q2 20211. These indicators suggest financial strain and operational challenges.
- Market Sentiment and Analysts' Views: Morgan Stanley's Adam Jonas has lowered his auto deliveries forecast for Q1 2025 to 351k, reflecting a 9.3% year-over-year drop2. This aligns with broader concerns about Tesla's sales slowdown and the need for a transition from a 'pure play' automotive model to a diversified AI and robotics focus2. Furthermore, Jonas has reduced his FY25 revenue forecast and auto gross margin, indicating a pessimistic outlook2.
- Fundamental Weaknesses: Tesla's revenue growth for Q1 2025 was only 2.15%, with a significant miss in estimates, and net income saw a 70.77% decline3. The company's struggles are not limited to Q1, with sales declines worldwide and a significant drop in China-made EVs3.
- Oversupply and Competition: The market is oversupplied with electric vehicles, and Tesla faces increased competition, an aging vehicle lineup, and negative brand sentiment, which have led to a buyers' strike2. These factors are expected to further challenge Tesla's market position and sales growth.
- Potential Silver Linings: Despite the gloomy forecast, some analysts, like Morgan Stanley's Adam Jonas, see Tesla's softer deliveries as a transition to a more diversified business model, which could be positive in the long term2. Additionally, the upcoming release of new products, such as the Model 2, could potentially boost sales4.
In conclusion, while there may be some long-term strategic reasons to consider Tesla as a diversified AI and robotics player, the current Q1 2025 EPS forecast does not indicate a compelling buying opportunity due to the company's current financial struggles, market challenges, and lack of near-term growth catalysts. Investors should exercise caution and consider the potential risks before making investment decisions.
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