Next up for Elon Musk: Crucial Tesla earnings and outlook

New York

Tesla is expected to report record earnings after Wednesday’s bell, but that may not be enough to satisfy anxious investors.

The company is facing growing doubts about its business after sluggish sales worldwide and a series of price cuts.

“I don’t think the fourth quarter is more important than what it means to the first quarter,” said analyst Gordon Johnson, one of Tesla’s tougher critics. “Guidance is key.”

Analysts surveyed by Refinitiv expect both fourth-quarter and full-year earnings to be higher than a year ago and likely to reach company records. That’s good news after his two quarters in which Tesla’s profits fell below all-time highs.

But on January 2, the company announced disappointing fourth-quarter sales despite price cuts announced in December. Later, he said, additional price cuts in January have raised concerns that the company is facing softening demand for its products. A US buyer is currently paying $44,000 for the basic version of the Model 3.

That makes Tesla’s controversial CEO Elon Musk’s guidance on future sales and margins released Wednesday especially significant.

So far this year, the stock has rebounded despite plummeting 12% on the first trading day of 2023 in response to a fourth-quarter sale, the biggest one-day drop in two years. The stock closed 17% higher year-to-date on Tuesday.

But Wednesday’s disappointing guidance on future sales and earnings could send the stock plummeting soon. And there are many reasons to worry.

“Will they rip off the band-aid and say they’re not going to see 50% sales growth anymore? And how bad will the profit margins be?” said to

Ives recently lowered his Tesla price target from $250 to $175.

Throughout the first half of last year, Tesla claimed it could achieve 50% annual sales growth despite the fact that its Shanghai factory and most of its sales in China were shut down by the Covid outbreak.

It wasn’t until after reporting third-quarter results that the company abandoned its 50% growth target for 2022. Sales in the fourth quarter only grew at 40% for the full year.

Ives said he believes a future growth target of 35% is more realistic given the increasing competition. in electric vehicles from conventional automakers. He also believes Tesla needs to clarify its profit margins given recent price cuts have reduced the expected revenue for each vehicle. But Johnson said he believes Musk and Tesla will continue their tradition of making overly ambitious promises.

“Elon Musk has a morbid problem with telling the truth, so the idea of ​​Tesla getting you closer to reality is unlikely,” Johnson said.

In addition to providing guidance on revenue and margins, Ives said it was important for Musk to reassure investors about the undermanagement issues that were a headwind for Tesla’s stock last year.

Musk spent the first two days of this week “securing funds” to get Tesla’s privately held company back when it was still in the red and facing cash shortages in a federal lawsuit over a 2018 tweet. I testified.. It turns out the funding wasn’t secured, but he again defended the tweet in testimony this week, saying he was confident Saudi investors were ready to back a deal that never happened. Stated.

Much of the news in the past nine months has been about Musk buying Twitter for $44 billion and selling $23 billion worth of Tesla stock to fund the deal. Some of those sales came after Musk declared on his Twitter that he had completed the sale of Tesla shares.

“From Twitter to lawsuits to the sale of his stock, there has been too much buzz in Tesla stock,” Ives said. “It would help if Musk said on the conference call that he wouldn’t be selling stocks anymore.”

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