Tesla Q4 Earnings Preview: Key Themes and Investor Focus

Tesla (TSLA) is set to report its Q4 2024 earnings on January 29 after market close. Investors will be closely watching whether the company can sustain the momentum from its strong Q3 results. According to FactSet, consensus estimates project EPS of $0.77 and revenue of $27.26 billion, representing a sequential improvement from Q3, which posted EPS of $0.72 and revenue of $25.18 billion. With Tesla coming off a rare earnings beat in Q3, expectations are heightened for another solid quarter.

Key Areas to Watch

Deliveries & Production Trends

- Tesla has already disclosed its Q4 deliveries at 495,570 vehicles, missing analyst estimates of 512,277. This slight miss raises concerns about demand elasticity, especially given Tesla’s ongoing price adjustments.

- Total production for Q4 came in at 459,445 vehicles, reflecting Tesla’s ongoing production challenges and factory optimizations.

- Full-year 2024 deliveries stood at 1.79 million vehicles, down 1% year-over-year, marking the first annual decline since Tesla ramped up production. Investors will be looking for Tesla’s outlook on 2025 growth.

Robotaxi & Full Self-Driving (FSD) Developments

- Tesla’s robotaxi ambitions remain a focal point, especially as CEO Elon Musk has promised volume production of its CyberCab in 2026 with a goal of 2 million units per year.

- The company has been testing a ride-hailing service in the Bay Area, with plans to expand into Texas and California, pending regulatory approval. Analysts will seek more details on commercialization and pricing models.

- FSD Version 13 is reportedly making major strides, with Musk stating it could improve interventions per mile by 5-6x. However, analysts remain divided on whether Tesla can transition from supervised to unsupervised autonomy in the near term.

Energy Storage Expansion as a Tailwind

- Tesla’s energy storage deployments have become a growing revenue stream, with Q4 deployments reaching 11 GWh, up 243% year-over-year.

- The energy division is expected to outpace automotive revenue growth, which could significantly alter Tesla’s long-term valuation.

- With continued scaling, analysts anticipate Tesla’s energy storage business to drive profit growth and offset margin pressures in the auto segment.

Musk’s Political Influence and Potential Impact

- Elon Musk’s increasingly prominent role in the Trump administration could have implications for Tesla’s regulatory landscape.

- Wedbush analysts believe Trump’s policies could be a game-changer for Tesla, particularly in autonomous driving regulations and AI infrastructure funding.

- However, potential policy shifts, including a rollback of the $7,500 EV tax credit, could pose risks to Tesla’s U.S. demand.

Analyst Expectations and Market Sentiment

- Goldman Sachs (GSCO) expects a slight margin deceleration but sees a positive delivery outlook for 2025 driven by the new Model Y.

- Wedbush raised its price target to $550, citing growing investor confidence in Tesla’s AI and autonomy roadmap.

- Piper Sandler increased its PT to $500, citing Tesla’s AI-driven potential, but warns of near-term volatility.

- Bank of America (BAML) downgraded Tesla to Neutral, stating big initiatives are already priced in.

- Morgan Stanley (MSCO) remains bullish, highlighting Tesla’s expansion beyond EVs into data, robotics, AI, and energy storage.

- Truist maintains Hold at $360, noting that Tesla’s FSD still has material weaknesses.

Tesla enters Q4 earnings with both optimism and challenges. While energy storage and FSD developments provide strong growth avenues, weaker-than-expected deliveries and production challenges remain a concern. Analysts are divided, with some seeing Tesla’s AI advancements as transformative, while others caution that the stock’s high valuation already reflects these future bets. Investors will be listening closely for Musk’s guidance on 2025 deliveries, FSD progress, and the trajectory of its Robotaxi initiative.

Tesla Q3 Earnings Recap: Strong Margins, Free Cash Flow, and the Future of Robotaxi

Tesla (TSLA) reported a strong Q3, delivering an earnings beat that surprised analysts and sparked a significant rally in its stock. The company posted adjusted EPS of $0.72, exceeding estimates of $0.60, while revenue came in at $25.18 billion, slightly below expectations of $25.43 billion. The standout metric for the quarter was Tesla’s gross margin, which reached 19.8%, significantly above the consensus estimate of 16.8% and up from 18% in Q2. Additionally, Tesla reported robust free cash flow of $2.74 billion, far surpassing estimates of $1.61 billion, signaling improved operational efficiency.

Key Drivers in Q3

One of the primary drivers behind Tesla’s EPS beat was a 6% year-over-year decline in the cost of goods sold, bringing the cost per vehicle down to its lowest-ever level of $35,100. This was attributed to lower raw material and freight costs, as well as improved manufacturing efficiencies, particularly for the Cybertruck, which achieved positive gross margins for the first time.

Tesla also benefited from increased regulatory credit sales, recognizing its second-highest quarter of revenue from these credits. The company’s energy storage business continued to expand, with deployments expected to more than double year-over-year in 2024. While vehicle revenue grew modestly by 2% to $20 billion, energy storage saw a 59% surge, further diversifying Tesla’s revenue streams.

Outlook for Q4 and Beyond

Looking ahead to Q4, Tesla reiterated its expectation for slight growth in vehicle deliveries in 2024. However, CEO Elon Musk also hinted at more ambitious growth in 2025, projecting vehicle deliveries to increase by 20-30% that year. The company remains focused on ramping up production of its lower-cost vehicles, which are slated for release in the first half of 2025.

Additionally, Tesla is betting big on energy storage, with Musk stating that this segment is "growing like wildfire." With continued scaling, Tesla expects its energy storage business to contribute meaningfully to future profit growth. The company’s ability to execute on this expansion could be a key factor in sustaining long-term revenue growth.

Analyst Reactions

Tesla’s earnings beat was well received, with shares jumping nearly 15% post-earnings. JPMorgan noted that the surprising beat was largely driven by regulatory credit sales and improved working capital benefits, which may not be sustainable over the long term. Canaccord raised its price target to $278, citing Tesla’s improving margins and accelerating revenue growth. Stifel also reiterated a Buy rating, highlighting strong automotive gross margins and continued Full Self-Driving (FSD) advancements.

However, Wells Fargo remained skeptical, reiterating an Underweight rating with a $125 price target. The firm expressed concerns over Tesla’s premium valuation, arguing that Robotaxi and FSD timelines remain uncertain and regulatory hurdles could delay adoption well beyond Musk’s predictions.

The Robotaxi Disruption

One of the most significant long-term catalysts for Tesla is its Robotaxi initiative. Musk confirmed that Tesla has been testing a ride-hailing service with employees in the Bay Area and expects paid rides to begin in Texas and California next year, pending regulatory approval. Tesla envisions mass production of its CyberCab by 2026, with an ambitious goal of producing 2 million units annually.

This development could pose a major threat to ride-hailing giants Uber and Lyft, both of which saw their stocks decline in after-hours trading following Musk’s predictions. RBC noted that Tesla’s entry into ride-hailing could create a new overhang for these companies, though they believe Uber’s tech-agnostic approach will help it maintain its competitive edge. If Tesla can execute on its Robotaxi plans, it could significantly disrupt the ride-hailing industry and potentially force Uber and Lyft to adapt to an autonomous future.