Tesla Stock Soars Post-Earnings: Musk’s Affordable EV Plans and Investor Criteria Drive Rally

Tesla Stock Rebounds After Q1 Earnings: Affordable EV Plans and FSD Focus Drive Investor Optimism

Despite reporting lower-than-expected first-quarter earnings and revenue, Tesla (TSLA) shares experienced a significant surge, jumping 12% on Wednesday. This unexpected rally was primarily attributed to Chief Executive Elon Musk’s announcement of plans to introduce “more affordable” new models. Musk also expressed confidence in achieving higher vehicle deliveries for 2024 and emphasized Tesla’s commitment to the development of full-self driving (FSD) technology during the earnings call.

Prior to the earnings announcement, Tesla stock had endured a challenging period in April, declining over 17% and reaching a 52-week low of 138.80 on Monday. However, investor sentiment took a positive turn immediately following the release of the Q1 results.

Here are the key factors that contributed to Tesla’s stock rally:

1. Promise of Affordable EV Models:

Elon Musk’s revelation of plans to introduce more affordable electric vehicle models resonated with investors. This announcement aligns with Tesla’s long-term goal of making EVs accessible to a broader consumer base.

2. Optimistic Delivery Forecast:

Musk’s projection of higher vehicle deliveries for 2024 instilled confidence among investors. This outlook suggests that Tesla remains on track to meet its ambitious growth targets despite supply chain challenges.

3. Focus on Full-Self Driving:

Musk’s emphasis on Tesla’s commitment to FSD technology development signaled the company’s continued dedication to innovation and technological advancement. FSD is seen as a key differentiator for Tesla and a potential driver of future revenue growth.

Tesla’s stock rally following the Q1 earnings report reflects the market’s positive response to Musk’s strategic vision and the company’s long-term potential.

Tesla Unveils Plans for More Affordable EV Models

Amidst earlier reports suggesting the cancellation or postponement of Tesla’s next-generation Model 2, the company has announced an updated future vehicle lineup that prioritizes the accelerated launch of new models. These new vehicles will include more affordable options, utilizing elements of both the next-generation platform and aspects of Tesla’s current platforms. This strategic move will enable Tesla to produce these new vehicles on the same manufacturing lines as its existing lineup.

According to CEO Elon Musk, the new model line is expected to arrive early in 2025, potentially even late in 2024. However, company executives refrained from providing further details about these low-cost vehicle plans during the earnings call.

Wedbush Securities analyst Dan Ives, a long-time Tesla advocate, believes that Tesla is opting for a “Model 2.5” approach rather than a full-fledged Model 2. Ives sees this as the right strategy and move at the appropriate time, offering a more practical solution for Tesla’s current circumstances.

Tesla’s 2024 Vehicle Delivery Outlook and Q1 Performance

In addition to addressing the company’s financial results, Tesla CEO Elon Musk shared his projections for 2024 vehicle deliveries. Musk expressed confidence that vehicle deliveries in 2024 will surpass those of 2023, despite the record-breaking 1.81 million deliveries achieved in the previous year. However, the automotive industry is currently facing a slowdown in EV demand.

Tesla’s first-quarter deliveries for 2023 totaled 386,810 units globally, while production reached 433,371 vehicles. The deliveries primarily comprised 369,783 Model 3 and Model Y units, along with 17,027 “other” vehicles. Notably, Tesla’s Q1 deliveries fell below even the most conservative estimates and marked the lowest quarterly deliveries since the second quarter of 2022, when the company delivered 344,000 vehicles. This development has prompted analysts to revise their delivery estimates downward.

According to Morgan Stanley analyst Adam Jonas, Tesla may require assistance from the market and flawless execution in introducing new, lower-priced models to achieve full-year sales growth, beyond implementing further price cuts.

Furthermore, Tesla’s global vehicle inventory at the end of the first quarter stood at 28 days, representing an 87% increase compared to the first quarter of 2023. Auto gross profit margins, excluding regulatory credits, came in at 16.4%, exceeding expectations of 15.9%.

Looking ahead, Musk expressed optimism about the second quarter, stating, “We think Q2 will be a lot better.”

Tesla’s Focus on Autonomy, Robotaxi, and Ride-Sharing

During the earnings call, Tesla emphasized its commitment to advancing full self-driving (FSD), autonomy, and artificial intelligence. The company recently transitioned from FSD Beta to supervised FSD and reported that it would recognize deferred revenue of $281 million by the end of the first quarter.

CEO Elon Musk emphasized the importance of autonomy for Tesla’s future, stating that investors who do not believe in Tesla’s ability to solve autonomy should not invest in the company. He also announced that Tesla will showcase its robotaxi, or “cybercab,” on August 8th, along with further discussions about the low-cost vehicle.

Tesla’s free cash flow turned negative in the first quarter, with the company spending $1 billion on “AI infrastructure.” The company plans to continue expanding its AI infrastructure capacity in the coming months and is developing ride-hailing functionality for future implementation. This move could potentially position Tesla as a competitor to ride-sharing services like Uber and Lyft.

Wedbush Securities analyst Adam Jonas believes that Tesla’s long-term goal is to offer autonomous ride-hailing vehicles. However, initially, the company will rely on a combination of Tesla owners and a Tesla-owned fleet using “human-supervised FSD.”

Tesla Stock Surges After Q1 Earnings: Key Takeaways

• Tesla’s stock experienced a significant rally, jumping 12% on Wednesday, despite reporting lower-than-expected first-quarter earnings and revenue.
• The surge was primarily attributed to CEO Elon Musk’s announcement of plans to introduce more affordable EV models.
• Musk also expressed confidence in achieving higher vehicle deliveries for 2024 and emphasized Tesla’s focus on full-self driving (FSD) technology during the earnings call.
• Prior to the earnings announcement, Tesla stock had faced challenges in April, declining over 17% and reaching a 52-week low of 138.80 on Monday.
• The positive investor sentiment following the Q1 results led to the stock’s rebound.
• Tesla’s updated future vehicle lineup prioritizes the accelerated launch of new models, including more affordable options that will utilize elements of both the next-generation platform and current platforms.
• The company expects the new model line to arrive early in 2025 or potentially late in 2024.
• Tesla also provided an outlook for higher vehicle deliveries in 2024 compared to 2023, despite the slowdown in EV demand.
• The company’s focus on autonomy, artificial intelligence, and FSD was highlighted during the earnings call.
• Tesla plans to showcase its robotaxi, or “cybercab,” on August 8th and will discuss the low-cost vehicle in more detail at that time.
• Tesla’s free cash flow turned negative in Q1, with investments in AI infrastructure.
• The company intends to expand its AI infrastructure capacity and is developing ride-hailing functionality for future implementation.

Tesla Stock’s Position in the Auto Manufacturers Industry Group

– Tesla stock ranks eighth among the 35 members of the IBD Auto Manufacturers industry group.
– The stock has a Composite Rating of 26 out of a possible 99, indicating a below-average overall performance.
– Tesla stock’s Relative Strength Rating is 10, suggesting that it has underperformed the broader market over the past 52 weeks.
– The stock’s EPS Rating is 65, indicating that its earnings per share growth has been below average compared to other companies in the industry group.