Tesla (TSLA) late Tuesday reported worse-than-expected first-quarter earnings and sales. Investors didn’t seem to care, and TSLA shares rose 12% on Wednesday after Chief Executive Elon Musk signaled that “more affordable” new models were on the way. Musk also predicted vehicle deliveries would be higher in 2024 and emphasized during the earnings call that Tesla is focused on full self-driving (FSD).
X
Before Tesla reported first-quarter results on Tuesday, TSLA shares had fallen more than 17% in April and hit a 52-week low of 138.80 on Monday. Investor sentiment appeared to be depressed. However, Tesla stock began rising immediately after its first quarter results. Here are the reasons why.
Low cost vehicle is coming
On the earnings front, there were reports that Tesla had scrapped or put on hold plans to produce its next-generation Model 2, a $25,000 vehicle.
However, Tesla reported that it has updated its “future vehicle lineup” to accelerate the introduction of new models ahead of our previously communicated production start in the second half of 2025.
These new vehicles include “more affordable models” and will “leverage aspects of the next generation platform as well as aspects of our current platforms,” according to Tesla. Tesla said it could produce these new vehicles on the same production lines as its current lineup of vehicles.
Musk added in the earnings call that the new model line will launch in early 2025 “if not late this year.”
Executives declined to elaborate on the company’s low-cost vehicle plans.
Wedbush Securities analyst Dan Ives, a long-time Tesla bull, wrote on Wednesday that it appears Tesla will use a “Model 2.5” instead of a Model 2.
“Although this is not a next-generation Model 2 platform, we believe this is the right strategy and the right move at the right time,” Ives wrote.
Tesla shares: Musk predicts higher vehicle deliveries for 2024
The Tesla boss also said in the conference call that he expects vehicle deliveries to increase in 2024 compared to 2023. The electric vehicle giant recorded a record 1.81 million deliveries in 2023. However, demand for electric vehicles appears to be slowing this year.
Tesla reported in early April that global first-quarter deliveries totaled 386,810 and the company produced 433,371 vehicles. Deliveries totaled 369,783 Model 3 and Model Y units and 17,027 “other” vehicles.
Tesla’s 386,810 first-quarter deliveries beat even the lowest estimates and marked the lowest quarterly deliveries since 344,000 in the second quarter of 2022. Analysts have since revised lower delivery estimates.
“Barring further price cuts, we believe full-year sales growth may require market support as well as smooth implementation of cheaper new model introductions,” Morgan Stanley analyst Adam Jonas wrote on Wednesday.
Meanwhile, Tesla ended the first quarter with 28 days of global vehicle inventory, up 87% compared to the first quarter of 2023. Automotive gross profit margins, excluding regulatory credits, were 16.4%, exceeding expectations of 15.9%.
“We believe the second quarter will be much better,” Musk said Tuesday.
Next generation platform, the Robotaxi and Ride Share
Musk and Tesla also spent a lot of time on Tuesday touting FSD, autonomy and artificial intelligence.
Tesla also recently transitioned full autonomous driving from FSD Beta to monitored FSD. The EV giant said it would record $281 million in deferred revenue by the end of the first quarter, according to regulatory filings.
“Tesla is almost entirely about solving autonomy and the ability to deliver that autonomy to a massive fleet,” Musk said on the earnings call.
He later added: “If someone doesn’t believe Tesla will solve autonomy, I don’t think they should be an investor in the company.”
The Tesla boss also confirmed that the company will “unveil” its Robotaxi or “Cybercab” on August 8 and that there will be more talk about a low-cost vehicle at that time.
Tesla’s free cash flow also fell by $2.5 billion in the first quarter as Tesla spent $1 billion on “AI infrastructure.”
The company also said it will “further increase” its AI infrastructure capacity in the “coming months” and that it is currently working on ride-hailing features that will be “available in the future.”
This could potentially lead to competition for Tesla Above (UBER) and Lyft (LYFT).
Jonas said Wednesday that Tesla’s long-term goal is to offer autonomous ride-hailing vehicles. However, according to Jonas, it will initially rely on “human-monitored FSD” from a combination of Tesla owners and a Tesla-owned fleet.
Tesla stock performance
TSLA shares rose about 5% to 170.18 during market action on Thursday. Tesla shares rose 12% to 162.13 on Wednesday, hitting an intraday high of 167.97. TSLA stock fell 3.4% to 142.05 on Monday and hit an intraday low of 138.80.
This week, Tesla shares are up more than 15%. However, the stock is still down around 3.3% in April.
Last week, Tesla shares plunged 14%, falling below April 2023 lows.
Tesla stock ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a Composite Rating of 28 out of a best possible 99. Tesla stock also has a Relative Strength Rating of 14 and an EPS Rating of 63.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
YOU MAY ALSO LIKE:
Is Tesla stock a buy or a sell?
Get full access to IBD stock lists and ratings
Learn How to Pick Great Stocks? Read Investor’s Corner
Is Rivian a buy right now after the company launched its new product line?
Futures Fall as Meta Plunges in Forecasts; Chipotle Eyes Buy Point