Tesla’s Q3 2024 Earnings: Growth Trends and Market Challenges Ahead

As Tesla stock (NASDAQ:TSLA) has surged over 22% in the last quarter, anticipation builds for the company’s Q3 2024 earnings report, expected around October 23. Tesla recently announced its delivery figures, demonstrating a total of 462,890 vehicles delivered, marking a 6.4% increase compared to last year. Even though these numbers fell short of Wall Street’s optimistic projections, they represent the first quarter of annual growth in deliveries for 2024. To provide context, deliveries saw declines of around 9% and 5% in Q1 and Q2, respectively. Looking ahead to Q3 estimates, revenue is projected at $25.4 billion, reflecting an approximate 8% increase year-over-year and slightly exceeding consensus estimates. Earnings per share are anticipated to reach about $0.58, compared to the consensus of $0.57 per share. Check our in-depth Tesla Earnings Preview for more insights. So, what trends will influence the performance this quarter?

This quarter’s delivery growth is likely fueled by Tesla’s revival in China, where the company has faced stiff competition and decreasing consumer demand. In response, Tesla launched promotional efforts, including zero-interest loans for up to five years and upfront discounts on several models. Additionally, new government electric vehicle (EV) subsidies and approval for the Model Y for government use are expected to further enhance sales. Although Tesla does not release specific delivery numbers for China, data from the China Passenger Car Association indicates a 19.2% year-over-year sales increase for Tesla in September, hinting that these promotions are effective. Furthermore, in the U.S., incentives like the 1.99% vehicle financing—available until August—and increased sales of the premium Cybertruck may have bolstered Q3 performance. Contrarily, the energy segment might deliver mixed results. Tesla deployed 6.9 gigawatt-hours (GWh) of energy storage products in the last quarter, less than the over 9 GWh in Q2 but an improvement from the 3.98 GWh recorded a year ago. The company has acknowledged that energy deployments can vary due to the timing of large-scale installations. Learn more about Tesla’s recent challenges in China.

Paying attention to Tesla’s margins this quarter is crucial. Aggressive promotions have impacted vehicle average selling prices. In Q1 2024, the average price for a Tesla vehicle dropped below $45,000, down from about $47,000 in the same quarter last year. In Q2, the figure slipped further to around $44,500, while gross margins stood at 18%, a decrease of about 20 basis points from the previous year. A small decline in margins over Q3 appears possible.

Over the past four years, TSLA stock performance has shown considerable volatility. The stock delivered 50% returns in 2021, suffered a stark -65% in 2022, and rebounded with 102% in 2023. In comparison, the Trefis High Quality (HQ) Portfolio, which comprises 30 stable stocks, has outperformed the S&P 500 every year in this timeframe. What’s behind this disparity? HQ Portfolio stocks, as a group, have yielded better returns with reduced risk compared to the benchmark index, showcasing steadier performance. With the current uncertain economic environment, marked by interest rate fluctuations and geopolitical tensions, will TSLA replicate its 2022 underperformance against the S&P over the next year, or is a rebound on the horizon?

We maintain that Tesla is well-positioned to benefit from the long-term shift towards cleaner transportation and energy solutions. Factors contributing to this include a strong supply chain, advanced battery and drivetrain technologies, and industry-leading software and self-driving capabilities. Nevertheless, the company’s delivery and earnings results are under pressure this year, falling below its ambitious target of 50% annual revenue growth. Currently, limited charging networks and reduced resale values for EVs are likely discouraging potential buyers. Notably, the market for early EV adopters appears to be reaching saturation, leading to diminished demand. Our valuation for Tesla stock stands at $230 per share, slightly less than its current market price. For further insights on Tesla’s valuation compared to its peers, check out our analysis on Tesla Valuation: Is TSLA Stock Expensive Or Cheap? For more details about Tesla’s business model and revenue flow, visit our dashboard on Tesla Revenue: How Does TSLA Make Money?

[1] Returns as of 10/10/2024
[2] Cumulative total returns 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.