ii view: Tesla misses forecasts but stays 2025 confident

Fourth-quarter results to 31 December

• Total revenue up 2% $25.7 billion
• Auto revenue down 8% to $19.8 billion
• Energy generation and storage revenue up 113% to $3 billion
• Services and other revenue up 31% to $2.84 billion
• Adjusted earnings per share up 3% to $0.73
• Cash and investments held up 26% to $36.6 billion

ii round-up:

Electric vehicle (EV) maker Tesla (NASDAQ:TSLA) detailed sales and earnings missing Wall Street expectations as intense competition and cautious consumer sentiment fuelled reduced demand. 

Fourth quarter auto related revenues fell 8% to $19.8 billion, although sat against a more than doubling in energy generation and storage system sales to $3 billion. That helped leave overall revenues up 2% to $25.7 billion, missing analyst forecasts of $27.3 billion. 

A gain of 2% in adjusted earnings to $0.73 per share also fell shy of hopes at $0.75 although with Tesla repeating 2025 guidance for a return to growth for the vehicle business, supported by advancements in vehicle autonomy and new products. 

Shares for the Nasdaq 100 company initially fell and then rose marginally in post results US trading having come into this latest news having about doubled over the last year. CEO Elon Musk’s help in achieving a Presidential win for Donald Trump could potentially see him taking a favourable stance towards autonomous vehicle legislation. The Nasdaq 100 itself is up 22% over that time. 

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Tesla full year 2024 deliveries, the nearest number it gives to sales, of 1,789,226 vehicles, fell from 1,808,581 in 2023, a first annual decline in over a decade. Telsa is expected to launch its new cheaper models during 2025 as well as starting a new Robotaxi service.  

Deployments for its energy generation and storage division hit a record, pushing quarterly gross profits to their highest ever. Tesla expects deployments to grow by at least 50% year-over-year during 2025.

Sales for the group’s Services and Other businesses division climbed 31% to $2.84 billion. Tesla launched EV Superchargers in three new countries and added over 10,000 new Superchargers, taking its global network to more than 65,000. 

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the results, highlighting Tesla as a ‘top pick’.   

ii view:

Started in 2003 by founders Martin Eberhard and Marc Tarpenning, Tesla today employs around 140,000 people. Producing only all electric vehicles, the group’s ‘T’ shaped logo is a nod to the cross section of an electric motor. Geographically, the US dominants with close to half of all group sales. That’s followed by China at just over a fifth, with other markets and including the UK accounting for the balance of around a third.   

For investors, rivals such as Ford Motor Co (NYSE:F), Bayerische Motoren Werke AG (XETRA:BMW) and Mercedes-Benz Group AG (XETRA:MBG) are all now actively pushing their own EV models. Borrowing costs to finance a vehicle purchase remain heightened. Capital expenditure increased 21% year-over-year to $2.87 billion as group investment in self-driving software and products such as robots remained ongoing. Supply chain challenges for certain components including those for Energy storage remain constrained, while an estimated price to Net Asset Value (NAV) of around 20 times compares to estimates for rivals at under two times, suggesting the shares are not obviously cheap.

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To the upside, climate change concerns are not going away. Innovative in manufacturing techniques including casting one major bodywork item instead of welding together many are reducing costs and therefore potential vehicle sale prices. Developments in products such as self-driving software and a Robotaxi could potentially generate significant profits going forward, while growing revenues away from autos are not to be overlooked. 

On balance, the slow generation of profits from areas such as the Robotaxi do give room for caution. That said, continued innovation and Tesla’s own estimates for a return to auto growth during 2025 are not to be ignored, with investors likely staying firmly interested.   

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:

Hold