There’s no two ways about it, Tesla’s earnings released overnight were woeful.
The company recorded revenues of $19.1bn in the first quarter, a huge miss of the $21.1bn a consensus of analyst forecasts had predicted. EPS was $0.27 versus expectations of $0.43.
“Tesla’s first-quarter delivery and production numbers on 2 April were as ugly as its Cybertruck design. That meant expectations were rock-bottom in the run-up to its financial results and it’s why the shares didn’t tank upon release of the Q1 earnings,” said Dan Coatsworth, investment analyst at AJ Bell.
Tesla’s problems are well-documented. Increased competition has taken a bite out of Tesla’s market share, and the CEO’s antics are proving to be a significant turn-off for customers.
Tesla shares fell less than 1% in the immediate reaction in after-hours trading following the release of the numbers. The benign response suggests that much of the bad news is already reflected in the price, and sentiment can’t get much worse.
Such a dynamic is required for an asset to bottom and rebound. If most of the investors seeking to sell the stock have already done so, it leaves bulls a clear path to the upside.
There are also several catalysts that could fire the stock up again.
Musk stepping back from his role at the US government is the most obvious.
Elon Musk’s stint in White House looks to be coming to an end. Reports suggest that his work Department of Government Efficiency has a time limit and Trump is becoming wary of the risks of having him around. Musk himself said he will reduce the time spent at DOGE from May.
With Musk now set to step down, everyone involved stands to benefit, not least Tesla shareholders. When news broke overnight that Musk would lessen his time at Trump’s side, the stock rallied.
Having Musk back at the helm will increase investor confidence in the stock and raise hopes he will refocus on driving innovation.
Tesla’s valuation isn’t justified by its EV business. Indeed, EVs aren’t the technological wonders they once were, and Tesla is slipping behind in terms of value and product quality compared to peers.
Tesla trades at such a high multiple because investors don’t want to miss out on the next world-changing technological advancement. Musk must be fully committed to the business to achieve ambitions in autonomous vehicles and AI.
“On the product side, more affordable models appear to be streamlined versions of the existing Model 3 and Model Y,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.
“It’s not quite the disruptive refresh some had hoped for, but if these versions can unlock new customer segments, it could be a net win – especially for maximizing output at current facilities.
“Then there’s the real crown jewel: autonomy. Tesla’s ride-hailing pilot is set to launch in Austin this June, with full-scale Cybercab production ramping up in 2026. In the race to bring AI into the physical world, Tesla still looks like the company with the most to gain.”
With comments overnight suggesting Musk will soon return to Tesla full-time, a bottom could be in the stock.