After Tesla’s sales slump, layoffs and other problems, this is an important earnings report

After Tesla’s sales slump, layoffs and other problems, this is an important earnings report

Tesla has had a very bad year so far. Investors will get a sense of just how bad it is after the company reports earnings and offers comments to investors after the bell today.

So far this year Tesla shares have fallen 43% at the close of trading Monday, after losing another 3% on the day following the latest round of price cuts announced over the weekend.

The drop in stock value has some Tesla bulls worried about the future for the world’s most valuable carmaker, and which has been among the most profitable over the past five years. Concerns about EV demand not meeting forecasts are hurting all auto stocks, but Tesla has had its own bad news lately to worry investors. And it makes what Tesla said Tuesday afternoon very important for its future.

“The moment of truth has now arrived for Elon Musk and Tesla,” said Dan Ives, an analyst with Wedbush Securities who has had a bullish view on Tesla for years. But he said “the conference call and messaging was one of the most important moments in the company’s history.”

“For the first time many long-time Tesla devotees have given up on the story and thrown in the towel,” he wrote. “The miscalculation of demand erosion in China has been a major blow to the bull thesis. The global EV landscape has turned Tesla from a Cinderella story to a horror show in the near future.”

The announcement of the latest price cuts, which cut US prices for the Model Y, Model X and Model S by $2,000 each, while leaving prices unchanged for the Model 3 and Cybertruck, followed the first year-over-year decline in global sales since the pandemic. Tesla has said it plans to cut more than 10% of its workforce. The company also said it sought approval from shareholders to restore stock options to allow CEO Elon Musk to buy 300 million shares of its stock at a discount after a Delaware judge earlier this year threw out a 2018 compensation package that included those options.

The company is clearly facing its biggest competitive challenge since it became profitable in 2019. Not only is it facing more competition from traditional western automakers launching their own EV models, but it is also facing increased competition from Chinese automakers.

EV battle with China
In the last three months of last year Tesla lost its title as the world’s largest EV maker to Chinese automaker BYD.

And although it reclaimed that title in the first quarter, its first-quarter sales were much weaker than expected, adding to concerns that strong growth projections for EVs have been overstated.

Ives was particularly concerned about what the unpredictable Musk might tell investors during Tuesday’s call.

“If Musk is helpless and there are no adults in the room on this conference call with no answers then darker days are ahead,” he wrote.

Despite a decline in sales and price cuts, Tesla is still the world’s most valuable automaker, with a market cap of $469 billion, about $100 billion more than No. 1 Toyota. 2 and nearly five times that of General Motors and Ford, combined.

But it has lost more than half its value since it became a $1 trillion stock, and some Tesla companies argue it is still overvalued. The company’s stock hit an all-time high in November 2021, after a very strong year, then lost almost two-thirds of its value in 2022, before doubling again in 2023 ahead of the current slide to 2024.

Analyst Gordon Johnson of GLJ Research says the latest price cut will cost Tesla at least $1 billion and should shave an additional 10% off the stock from Monday’s drop.

“It is our strong opinion that the full extent of this weekend’s ‘nightmare’ price cut was not fully appreciated by Mr Market,” he wrote on Monday.

Analysts forecast Tesla will report adjusted earnings of 49 cents per share, well below the 85 cents per share reported a year ago. Its profit margin, which is also a closely watched number, has fallen steadily since it started the EV price war more than a year ago.

But much of the focus on Tuesday will be on his guidance for future plans, particularly a lower-priced version of his car, which will be called the Model 2, and plans It’s for a group of unmanned “robotaxis”, said to be announced soon. in August.

After Reuters reported earlier this month that it had dropped plans for the Model 2 because of competition from China, Musk tweeted “Reuters lied (again),” without providing any details of the company’s plans. But in January, he warned that Chinese automakers could ‘demolish’ rivals with low-priced EVs. What he said about competition from China’s EVs today will also be a key focus for investors.