Tesla’s Q4 Earnings: Stock Struggles Amid Electric Vehicle Market Challenges

Tesla (NASDAQ: TSLA) shares initially ignored a disappointing earnings report but later succumbed to the broader market’s trade-war sell-off. The electric vehicle (EV) manufacturer faced difficulties in 2024, yet CEO Elon Musk remains optimistic about the future. During the latest earnings call, he indicated that Tesla stock could eventually be worth more than the combined total of the next five largest companies.

Let’s analyze Tesla’s recent financial results to determine if the stock is a worthwhile investment.

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Declining Automotive Sales Impact Results

In Q4, Tesla reported revenue growth of just 2% year over year, totaling $25.7 billion. Adjusted earnings per share (EPS) saw a slight increase of 3% to $0.73, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 25% to $4.9 billion. However, these profitability metrics were negatively affected by a 9% rise in operating expenses and a decrease in gross margin from 17.6% to 16.3%.

Tesla’s results fell short of analyst expectations. Analysts had anticipated an EPS of $0.76 and revenue projections at $27.3 billion, according to LSEG data.

Automotive revenue fell 8% to $19.8 billion, despite Model 3/Y deliveries increasing by 2% to 422,405 units. Other models, including the Cybertruck, also saw a 3% boost in deliveries to 23,640 vehicles.

Production numbers tell a different story, with total vehicle production declining by 7% to 459,445 vehicles. Model 3/Y production dropped by 8%, though production of other models increased by 25%.

These disappointing numbers came even as Tesla implemented various promotions during the quarter. In North America, they offered customer referral discounts, while in China, the price of the Model Y SUV was reduced in anticipation of launching the Model Y Juniper.

Nonetheless, Tesla reported record low production costs, dropping below $35,000 per vehicle.

On a brighter note, the company’s non-auto segments showed strong performance. Revenue from energy generation and storage more than doubled to around $3.1 billion, while service and other revenue climbed 31% to $2.8 billion. The Megapack and Powerwall recorded 11.0 GWh in combined deployments during the quarter, contributing to gross profits in this segment. Tesla also expanded its Supercharging network by adding 3,000 new stalls, boosting service revenue.

Looking ahead, Tesla did not issue formal forecasts for 2025. However, Musk expressed confidence that the automobile unit would return to growth next year. He also announced plans to roll out unsupervised full self-driving as a paid service in Austin, Texas, starting in June, with an expectation to operate unsupervised driving in several cities by year-end. Additionally, Musk mentioned that other automakers have shown interest in licensing Tesla’s technology.

Continuing his visionary approach, Musk stated plans to produce 10,000 Optimus humanoid robots by the end of the year, which he claims will serve meaningful purposes.

Citing his ambitions, Musk argued there is potential for Tesla to surpass the combined market cap of the next five largest companies. Despite Tesla being the seventh largest in the S&P 500 at the year’s end, this prospect appears unlikely.

Image source: Getty Images.

Should Investors Consider Buying Tesla Stock?

Currently, Tesla seems focused on diverting investor attention from its struggling EV business. Historically, the company has branded itself as a tech leader rather than a traditional car manufacturer. However, current financial metrics clearly align it more closely with an automobile company.

In Q4, Tesla reported gross margins of 16.3% and operating margins of 6.2%. In comparison, General Motors (NYSE: GM) showed an auto gross margin of 12% and operating margin of 6.8%. To contrast, a hardware tech company like Nvidia boasted gross margins nearing 75% and operating margins of 62% last quarter.

Musk has made many lofty promises over the years, joking during the earnings call about being the “boy who cried wolf.” While he maintains that a genuine breakthrough in self-driving technology is imminent, Tesla still trails behind Alphabet‘s Waymo, which operates in multiple U.S. cities, and the economic viability of fully autonomous driving remains uncertain.

From a valuation standpoint, Tesla currently trades at a forward price-to-earnings (P/E) ratio of 98.5, based on 2025 estimates. In comparison, Ford (NYSE: F) has a forward P/E of 5.6, while GM’s stands at 4.2.

TSLA PE Ratio (Forward 1y) data by YCharts

At this moment, Tesla’s stock seems to be driven more by optimism than by the fundamentals of its business. This speculative approach has proven successful for the company in the past, suggesting that as long as investors are willing to buy into Musk’s vision, the stock may continue to rise.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Tesla. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.