Tesla (TSLA) Q4 2024 Earnings Preview: AI Advances and Production Challenges in Focus

As Tesla prepares to report its fourth-quarter earnings after market close on Wednesday, January 29, 2024, investors are keenly focused on the company's strategic priorities amid changing market dynamics. The electric vehicle maker's stock has shown remarkable performance over the past year, gaining approximately 120% despite recent volatility, with shares declining nearly 7% over the past six trading sessions. Market implied one day move based on historical averages is 8.49%.

Earnings Estimates 

For the fourth quarter, analysts expect Tesla to report:

• Revenue of $27.21 billion, representing an 8.1% year-over-year increase

• Adjusted earnings per share of $0.75, compared to $0.71 in the previous year

• Operating income of $2.68 billion, up from $2.1 billion year-over-year

• Free cash flow of $1.75 billion

• Gross margin of 18.9%

• Capital expenditure of $2.72 billion

Earnings vs Estimates. Source: Bloomberg

AI and Autonomous Driving Progress 

Recent developments in Tesla's autonomous driving capabilities have taken center stage, with the company announcing a breakthrough in factory-to-loading dock autonomous navigation. CEO Elon Musk has made bold predictions about the company's Full Self-Driving (FSD) technology, suggesting it will surpass human driving safety by Q2 2025. The company's significant investment in AI computing infrastructure, including the "Cortex" data center in Austin, Texas, positions it uniquely in the autonomous driving space.

The focus on FSD development comes at a crucial time, with the NHTSA recently opening a probe into approximately 2.6 million Tesla vehicles equipped with the technology. Investors will be particularly interested in management's response to these regulatory challenges and any updates on the planned robotaxi service launch in late 2025. The company's extensive investment in AI computing, including substantial purchases of Nvidia H100 GPUs, underscores its commitment to advancing autonomous driving capabilities.

Production and New Models 

The fourth quarter saw Tesla deliver approximately 496,000 vehicles, up from 485,000 in Q4 2023. A key focus for investors will be the launch timeline for the lower-priced "Model 2" expected in early 2025, which could be crucial for achieving the company's projected 20-30% delivery growth in 2025. The performance of the recently refreshed Model Y in US and China markets will also be closely monitored, along with updates on Cybertruck production amid reports of worker furloughs at the Giga Austin facility. The market is particularly attentive to this earnings report given Tesla's recent announcement of its first annual delivery decline in over a decade, with 2024 deliveries reaching 1.79 million vehicles, slightly below 2023 levels.

Vehicles sold Estimates vs Actual. Source: Bloomberg

Energy Division 

Tesla's energy storage business has emerged as a bright spot, with Q4 deployments reaching a record 11.0 gigawatt hours, compared to 3.2 gigawatt-hours in Q4 2023. This remarkable growth in the energy segment demonstrates the company's successful diversification beyond automotive sales and could provide important support for overall margins.

Political and Regulatory Environment 

The company's relationship with the Trump administration has emerged as a significant factor for investors. Potential changes to self-driving regulations, the future of the $7,500 federal EV tax credit, and possible tariff adjustments could all materially impact Tesla's business model. Some analysts, including Wedbush's Dan Ives, suggest that Tesla's AI and autonomous initiatives could benefit from expedited regulatory approval under a Trump administration, though others caution that state and local regulations may remain a significant hurdle.

Market Outlook and Analyst Perspectives 

Wall Street remains divided on Tesla's near-term prospects. Morgan Stanley maintains an overweight rating with a $430 price target, citing the company's AI potential and manufacturing capabilities. Barclays holds a more cautious equalweight stance with a $325 target, noting concerns about demand and competition. The upcoming earnings call, scheduled for 5:30 PM ET, will likely address critical areas including manufacturing efficiency, cost reduction initiatives, and international expansion plans.

Tesla (D1 Interval)

Tesla is currently trading near the 50-day SMA, which has previously acted as support for bulls. To regain upward momentum, the price should remain above the 23.6% Fibonacci retracement level, which has recently served as a key inflection point. Bears will attempt to break below the 38.2% Fibonacci retracement level, with a likely target at the 50% Fibonacci retracement level, which was a consolidation zone in November. The RSI has begun to show bearish divergence, while the MACD is also signaling caution ahead. Source: xStation