Tesla (TSLA.US) reported Q1 2024 earnings report yesterday after close of Wall Street session. Report turned out to be a disappointment when compared to median analysts' expectations compiled by Bloomberg. However, stock rallied in the after-hours trading yesterday and is holding onto these gains in pre-market today as some say that results are not as bad as feared.
Tesla results for Q1 2024 were weaker all cross the board. Company reported that the first year-over-year revenue drop since Q2 2020, while sales in nominal value were the lowest since Q2 2022. Gross profit, operating income and net income all missed expectations and declined significantly compared to a year ago.
Start investing today or test a free demo
Open real account TRY DEMO Download mobile app Download mobile appTesla Q1 2024 earnings
- Revenue: $21.30 billion vs $22.30 billion expected (-8.7% YoY)
- Automotive revenue: $17.38 billion vs $18.89 billion expected (-13.0% YoY)
- Gross profit $3.70 billion vs $3.80 billion expected (-18.7% YoY)
- Gross margin: 17.4% vs 16.5% expected (19.3% a year ago)
- Operating expenses: $2.53 billion vs $2.32 billion expected (+36.7% YoY)
- Operating income: $1.17 billion vs $1.53 billion expected (-56% YoY)
- Operating margin: 5.5% vs 7.1% expected (11.4% a year ago)
- Net income: $1.13 billion vs $1.46 billion expected (-55.1% YoY)
- Net margin: 5.3% vs 7.5% expected (10.8% a year ago)
- Adjusted EPS: $0.45 vs $0.52 expected ($0.85 a year ago)
- Capital expenditures: $2.77 billion vs $2.39 billion expected (+34% YoY)
- Operating cash flow: $0.24 billion vs $3.34 billion expected (-90.4% YoY)
- Free cash flow: -$2.53 billion vs +$0.66 billion expected (+$0.44 billion a year ago)
Tesla reported the first year-over-year revenue drop since Q2 2020. Source: Bloomberg Finance LP, XTB Research
A big surprise in Tesla's Q1 2024 report was a massive and unexpected $2.5 billion cash burn. On one hand, the company reported much higher-than-expected capital expenditures and increased investments are usually long-term positive for the company. However, magnitude of CapEx beat and year-over-year increase does not justify such a deep, negative free cash flow. The answer lies in operating cash flow. Tesla reported a 90% YoY plunge in operating cash flow! This is a very worrying development that shows that price cuts are taking a heavy toll on company's financials. While negative free cash flow coming from increase investments is not as worrying as it hints at potential improvement in the future, a deep plunge in operating cash flow hints at deterioration in company's core business. On the other hand, it should be said that Tesla usually sees a seasonal dip in Q1 in operating cash flow, as many vehicle purchases tend to be made in the second half of the year, often during Q4 holiday period.
Tesla's operating cash flow plunged in Q1 2024. While Q1 often sees seasonal dip in operating cashflow, scale of the plunge suggests that price cuts are taking a toll on the company. Source: Bloomberg Finance LP, XTB Research
Price cuts are also reflected in Tesla's margins. While those remain positive, they have dropped to multi-year lows in the most recent quarter. Gross margin at 17.4% was the lowest since Q2 2019, while operating and net margins at 5.50% and 5.3%, respectively, were the lowest since Q1 2021.
Tesla experienced further deterioration in margins in Q1 2024. Source: Bloomberg Finance LP, XTB Research
In spite of all this negative developments, Tesla shares spiked in the after-hours trading. There was a lot of negative sentiment around Tesla recently, with company reporting weak Q1 deliveries and production data, as well as delaying some investments and announcing massive lay-offs. This could have guided market expectations below analysts' expectations and, in this regard, market participants may have expected even weaker results. This lack of outright catastrophe may have led some to believe that the company is now an investment opportunity, following an over 40% year-to-date slump.
Nevertheless, Tesla itself does not expect material improvement in business this year, saying that it still expects a notably lower volume growth in 2024. On the other hand, company tried to alleviate investors' concerns and hint that improvement is coming, with plans to accelerate launch of new models and get more heavily involved in AI, with its robotaxis. However, those announcements lacked details, but seem to be winning investors' favour combined with relatively low valuation in historical terms. Still, investors should keep in mind that current Tesla's fundamentals are not too encouraging and there is a big risk involved in the stock.
Tesla (TSLA.US) is trading over 12% higher in premarket, in spite of a release of disappointing Q1 2024 report. Guidance offered by the company has been vague and lacked details, but investors do not seem concerned. Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
