ii view: Musk shifting focus to Tesla after results miss

First-quarter results to 31 March

• Total revenue down 9% $19.34 billion
• Auto revenue down 20% to $13.97 billion
• Energy generation and storage revenue up 67% to $2.73 billion
• Services and other revenue up 15% to $2.64 billion
• Adjusted earnings down 40% to $0.27 per share
• Cash and investments held up 38% to $37 billion

ii round-up:

Tesla Inc (NASDAQ:TSLA) detailed sales and earnings that missed Wall Street forecasts, but reiterated hopes for a launch of AI-backed products such as its self-drive taxi later in the year. 

Factors including lower auto selling prices and weaker demand following CEO Elon Musk’s support of Donald Trump, pushed auto related revenue down by a fifth to $13.97 billion. 

Group-wide revenue, which includes increased solar and energy storage sales, fell 9% to $19.34 billion. Also factor in the cost of incentives to drive car sales, and earnings were down 40% year-over-year to $0.27 per share. Analysts had been expecting revenue and earnings of $21.1 billion and $0.39 per share respectively. 

Shares in the Nasdaq 100 company initially fell by 2% in post results trading, but later gained around 6% following news that President Trump is not planning to sack Federal Reserve chair Jerome Powell. Tesla shares came into these latest results down around 40% year to date, with previously announced Q1 auto deliveries, the nearest number Tesla gives to volumes, down a third from Q4 2024 to 336,681. 

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Tesla gave no full-year forecast on expected auto deliveries, highlighting shifting global trade policy as a factor. Head Elon Musk flagged plans to reduce the time he spends on government issues and return to concentrating on Tesla.

A pilot launch of Tesla’s self-drive, or Robotaxi in Austin, Texas, remains on track for June, with builds of its Optimus robots also expected to be made at its Fremont California factory by the end of the year. 

A near halving in capital expenditure, or investment spending year-over-year helped first-quarter free cashflow of $664 million, better than Wall Street expected. Cash held climbed 38% from a year ago to $37 billion.

Broker Morgan Stanley reiterated its ‘overweight’ stance on Tesla shares post the results, flagging an estimated fair value price of $410 per share. 

Second-quarter results are likely to be announced mid-to-late July.

ii view:

Headed by Elon Musk, Tesla makes both electric vehicles and energy generation and storage systems. Services related revenues include an expanding network of superchargers. Automotive related demand accounted for almost 90% of revenues during 2024. Geographically, the US dominated in 2024 with close to half of all sales. That was followed by China at just over a fifth, with other markets and including the UK accounting for the balance of close to a third.   

For investors, Musk’s venture into politics may have deterred many potential customers, with his time spent at Tesla also reduced. Imposed US trade tariffs now offer outlook uncertainty, with a possible US-China trade war also potentially hindering Tesla’s supply chain and access to rare earth minerals used in battery production. Rivals such as Volkswagen AG (XETRA:VOW), Ford Motor Co (NYSE:F), Mercedes-Benz Group AG (XETRA:MBG) and Bayerische Motoren Werke AG (XETRA:BMW) are all now actively pushing their own electric vehicle (EV) models. Alphabet Inc Class A (NASDAQ:GOOGL) or Google’s Waymo self-drive vehicles offer competition to Tesla’s Robotaxi, while an estimated price-to-net asset value (NAV) of around 10 times compares to estimates for rivals at under two times, suggesting the shares are not obviously cheap.

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More favourably, developments in products such as self-driving software, a Robotaxi, and robots, could all potentially generate significant profits in future. Innovative manufacturing techniques including casting one major bodywork item instead of welding together many, are reducing costs and therefore potential vehicle sale prices. Elon Musk does now appear to be prioritising his role as Tesla CEO, while concerns about global climate change have not disappeared.  

In all, near-term risk appears to have increased given trade tariff uncertainties and Elon Musk’s involvement in politics, while longer term concerns about cheap competition from China and elsewhere are increasing. That said, Tesla remains a stock of interest to many investors given its ability for innovation. It will remain one to watch as Musk switches his attention back to getting the business on track. 

Positives: 

• Climate change concerns persist
• Expanding network of superfast charging stations

Negatives:

• Rising competition from other manufacturers
• Potential regulatory hurdles for self-driving vehicles

The average rating of stock market analysts:

Strong hold