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Tesla Slumps on Q4 Earnings Miss and Soft Outlook: ETFs in Focus
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Tesla (TSLA - Free Report) , the electric vehicle (EV) manufacturer, released its Q4 earnings report on Jan 24, after the market closed, which missed estimates and led to a decline in its stock price. Tesla shares fell about 5.9% in after hours on Jan 24, 2024. The company also provided a pessimistic outlook for full-year production in 2024.
Tesla has a moderate VGM score of “C”. Based on short-term price targets offered by 25 analysts, the average price target for Tesla comes to $237.04. The forecasts range from a low of $85.00 to a high of $380.00. The average price target represents an increase of 13.34% from the last closing price of $209.14 observed on Jan 23, 2024.
Hence, investors having a strong stomach for risks, may bet on Tesla-heavy ETFs like Meet Kevin Pricing Power ETF (PP - Free Report) , Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) , Vanguard Consumer Discretionary ETF (VCR - Free Report) , MicroSectors FANG+ ETN (FNGS - Free Report) , Fidelity MSCI Consumer Discretionary IndexETF (FDIS - Free Report) and ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report) . These ETFs have 20% to 10% exposure to Tesla.
Let’s delve a little deeper into the Q4 earnings and outlook.
Q4 Financial Performance
Tesla came out with quarterly earnings of $0.71 per share, missing the Zacks Consensus Estimate of $0.75 per share. This compares to earnings of $1.19 per share a year ago. Tesla posted revenues of $25.17 billion in Q4, missing the Zacks Consensus Estimate by 2.97%. Despite this, revenue showed a modest 3% increase compared to the same period the previous year.
Tesla's decline in profitability can be attributed to multiple factors. The company-initiated cost-cutting efforts in late 2022, which put downward pressure on its margins. In the fourth quarter, Tesla reported a gross margin of 17.6%, marking a considerable decline from the previous year. This also marked a sequential decline from the 17.9% margin achieved in Q3.
Record Q4 Deliveries and Growth
Despite the challenges, Tesla reported 484,507 deliveries in the fourth quarter, beating Street estimates of 483,173. This figure represented an all-time record quarter for Tesla, topping its previous best of 466,000 units delivered in the second quarter of the previous year. For the entire year, Tesla achieved a 38% year-over-year increase in vehicle deliveries, reaching 1.81 million, while production surged 35% to 1.85 million units.
Full-Year Production Outlook
Tesla's outlook for full-year production in 2024 was discouraging as the company acknowledged that its vehicle volume growth rate might be "notably lower" than the growth rate recorded in 2023. This announcement indicated that Tesla would not reach the Street's estimate of 2.19 million vehicles for 2024, which marked a 21% uptick from the previous year, per Yahoo Finance.
Tesla did not provide specific details about Cybertruck deliveries in its Q4 update, but Elon Musk reiterated the strong demand for the vehicle and indicated that the production ramp for the Cybertruck would take longer compared to other models.
Next-Generation Vehicle
Despite the financial setbacks, Tesla CEO Elon Musk confirmed the upcoming release of the company's next-generation vehicle, slated for the second half of 2025. This vehicle, often referred to as "Redwood," will be produced at Gigafactory Texas and is expected to revolutionize vehicle manufacturing with a highly advanced platform.
What Lies Ahead?
The outlook appears mixed. While there is strong demand for Cybertrucks and Musk's confidence in the demand and production of the next-generation vehicle, several challenges are also in the queue. These include rental car company Hertz shedding thousands of Tesla EVs from its fleet and Tesla's decision to cut prices in China, per Yahoo Finance.
Musk also addressed concerns about his level of influence within Tesla, expressing worries about potential loss of control in the future due to his current shareholding. He expressed concerns that major shareholder proxy advisory companies like Institutional Shareholder Services (ISS) and Glass Lewis could potentially make decisions that affect his position within the company, per the above-mentioned source.
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Tesla Slumps on Q4 Earnings Miss and Soft Outlook: ETFs in Focus
Tesla (TSLA - Free Report) , the electric vehicle (EV) manufacturer, released its Q4 earnings report on Jan 24, after the market closed, which missed estimates and led to a decline in its stock price. Tesla shares fell about 5.9% in after hours on Jan 24, 2024. The company also provided a pessimistic outlook for full-year production in 2024.
Tesla has a moderate VGM score of “C”. Based on short-term price targets offered by 25 analysts, the average price target for Tesla comes to $237.04. The forecasts range from a low of $85.00 to a high of $380.00. The average price target represents an increase of 13.34% from the last closing price of $209.14 observed on Jan 23, 2024.
Hence, investors having a strong stomach for risks, may bet on Tesla-heavy ETFs like Meet Kevin Pricing Power ETF (PP - Free Report) , Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) , Vanguard Consumer Discretionary ETF (VCR - Free Report) , MicroSectors FANG+ ETN (FNGS - Free Report) , Fidelity MSCI Consumer Discretionary Index ETF (FDIS - Free Report) and ARK Autonomous Technology & Robotics ETF (ARKQ - Free Report) . These ETFs have 20% to 10% exposure to Tesla.
Let’s delve a little deeper into the Q4 earnings and outlook.
Q4 Financial Performance
Tesla came out with quarterly earnings of $0.71 per share, missing the Zacks Consensus Estimate of $0.75 per share. This compares to earnings of $1.19 per share a year ago. Tesla posted revenues of $25.17 billion in Q4, missing the Zacks Consensus Estimate by 2.97%. Despite this, revenue showed a modest 3% increase compared to the same period the previous year.
Tesla's decline in profitability can be attributed to multiple factors. The company-initiated cost-cutting efforts in late 2022, which put downward pressure on its margins. In the fourth quarter, Tesla reported a gross margin of 17.6%, marking a considerable decline from the previous year. This also marked a sequential decline from the 17.9% margin achieved in Q3.
Record Q4 Deliveries and Growth
Despite the challenges, Tesla reported 484,507 deliveries in the fourth quarter, beating Street estimates of 483,173. This figure represented an all-time record quarter for Tesla, topping its previous best of 466,000 units delivered in the second quarter of the previous year. For the entire year, Tesla achieved a 38% year-over-year increase in vehicle deliveries, reaching 1.81 million, while production surged 35% to 1.85 million units.
Full-Year Production Outlook
Tesla's outlook for full-year production in 2024 was discouraging as the company acknowledged that its vehicle volume growth rate might be "notably lower" than the growth rate recorded in 2023. This announcement indicated that Tesla would not reach the Street's estimate of 2.19 million vehicles for 2024, which marked a 21% uptick from the previous year, per Yahoo Finance.
Tesla did not provide specific details about Cybertruck deliveries in its Q4 update, but Elon Musk reiterated the strong demand for the vehicle and indicated that the production ramp for the Cybertruck would take longer compared to other models.
Next-Generation Vehicle
Despite the financial setbacks, Tesla CEO Elon Musk confirmed the upcoming release of the company's next-generation vehicle, slated for the second half of 2025. This vehicle, often referred to as "Redwood," will be produced at Gigafactory Texas and is expected to revolutionize vehicle manufacturing with a highly advanced platform.
What Lies Ahead?
The outlook appears mixed. While there is strong demand for Cybertrucks and Musk's confidence in the demand and production of the next-generation vehicle, several challenges are also in the queue. These include rental car company Hertz shedding thousands of Tesla EVs from its fleet and Tesla's decision to cut prices in China, per Yahoo Finance.
Musk also addressed concerns about his level of influence within Tesla, expressing worries about potential loss of control in the future due to his current shareholding. He expressed concerns that major shareholder proxy advisory companies like Institutional Shareholder Services (ISS) and Glass Lewis could potentially make decisions that affect his position within the company, per the above-mentioned source.