Tesla (NASDAQ:TSLA) is expected to release its Q4 2023 results on January 24. reporting a quarter that saw the company’s deliveries trend higher, driven by stronger sales of its entry-level vehicles after pricing. We expect Tesla’s revenue to come in at $25.5 billion, slightly ahead of consensus estimates and about 4.5% ahead of last year. Earnings are likely to come in around $0.75 per share, slightly ahead of consensus. So, what are some of the trends that are likely to drive Tesla’s results?
Tesla reported 485,000 deliveries for Q4 2023, marking an increase of about 20% against last year. Now growth in the EV market has cooled, amid high interest rates that make it more expensive to finance EVs, as well as weaker consumer sentiment amid an uncertain economy. However, Tesla benefited from a number of trends. For example, the company sold a refreshed version of its Model 3 in select markets, while also starting deliveries of its latest Cybertruck truck in the U.S. Tesla cut prices on some of its vehicles over the last year and began a limited amount of advertising in the second half. from 2023 – something the company has largely avoided since its incorporation. However, these moves are hurting Tesla’s profitability. During Q3 2023, Tesla’s operating margins fell to just 7.6%, down from about 17% in the prior year. We could see similar trends over Q4 as well.
Amidst the current backdrop, TSLA shares have seen little change, moving slightly from levels of $235 in early January 2021 to around $225 now, versus an increase of around 25% for the S&P 500 over this roughly 3-year period. Overall, the performance of TSLA stock with respect to the index has been quite volatile. Returns for the stock were 50% in 2021, -65% in 2022, and 84% in 2023. By comparison, returns for the S&P 500 were 27% in 2021, -19% in 2022, and 24% in 2023 – indicating. that TSLA underperformed the S&P in 2022.
In fact, consistently beating the S&P 500 – in good times and bad – it’s been tough over the past few years for individual stocks; for other heavyweights in the Consumer Discretionary sector including AMZN, HD and TM, and even for the mega-cap stars GOOG, MSFT and AAPL.
In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 every year during the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less roller coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and high interest rates, could TSLA face a similar situation as it did in 2022 and underperforms the S&P over the next 12 months – or will it see a sharp jump?
We currently remain relatively neutral on Tesla stock, with a price estimate of $237, which is slightly ahead of the market price of $227. We continue to believe that Tesla will remain a large beneficiary of the long-term transition to cleaner transportation and energy production, due its well-oiled supply chain, superior battery and drivetrain technology, and its lead with software and self-driving technology. That said, Tesla stock currently trades at roughly 72x 2024 consensus earnings, which could limit near-term upside. Competition is also increasing and Tesla’s lineup is aging, as its Model 3, Y, X and S have remained the same visually since launch. That’s in contrast to major automakers, which typically revise vehicle models every seven to eight years. While Tesla recently launched the Cybertruck, we believe the vehicle will remain a niche offering, given its high price and unconventional appearance. See our analysis on Tesla Rating: Is TSLA stock expensive or cheap? for more details on Tesla’s valuation and how it compares to peers. For more information on Tesla’s business model and revenues, check out our dashboard Tesla Income: How Does TSLA Make Money?
returns | Jan 2024 MTD (1) |
From the beginning from 2023 (1) |
2017-24 Total (2) |
TSLA Return | -9% | 84% | 1495% |
S&P 500 Return | 0% | 25% | 114% |
Hit Enhanced Value Portfolio | -2% | 35% | 594% |
(1) Returns as of 1/12/2024
(2) Cumulative total profit since the end of 2016
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.