Strap in for Tesla Earnings Volatility

Electric vehicle juggernaut Tesla (NASDAQ:TSLA) is gearing up to release its Q4 earnings on January 24. Anticipation is on the rise as analysts are eyeing a projected revenue of $25.8 billion and an estimated EPS of $0.74. Observers are especially attuned to the impact of recent price adjustments on select Tesla models in key markets—a development that places the gross margin threshold under intense scrutiny. Forecasts indicate an expected gross margin rate of 18.1%, up from 17.9% in Q3 and a significant leap from 16.0% a year prior. Furthermore, market-watchers are eagerly awaiting the disclosure of the envisioned production guidance for 2024, insights into margin trajectories, and potential updates on AI, FSD, and robotics technologies. The deck is also stacked with wildcards, including the possibility of a new model introduction or the unveiling of a Gigafactory. The looming spectacle might also feature some awkwardness if CEO Elon Musk is pressed to clarify his recent threat to pursue AI ventures outside of Tesla (TSLA) in the event of stymied voting control.

Looking ahead, Barclays suggests that Tesla’s (TSLA) pivotal theme in 2024 revolves around facing pressure in volume within a demand-constrained landscape. Notably, 2024 could mark the first instance in which Tesla’s production volume may be predominantly steered by demand, as opposed to attaining maximum production capacity. The firm’s prognosis envisions Tesla delivering 1.97 million units in 2024, a figure that trails the existing consensus estimate of 2.1 million units and falls far short of the 50% CAGR target set forth by Tesla several years ago. Morgan Stanley has pared down its price target for Tesla (TSLA) to $345 from $380 prior to the earnings release, cautioning about mounting evidence indicative of an adverse balance in the global EV sector, marked by spiraling supply against tapering demand. This imbalance is underscored by recent price adjustments, the expiration of EV incentives, ballooning capacity in China, EV fleet contractions, and political jitters in an election year. Analyst Adam Jonas opined that the market might be nearing its zenith of pessimism regarding EVs, with the lowest ebb likely to materialize towards the latter part of 2024, compounded by the EU Parliamentary and U.S. Presidential elections.

Options trading indicates a projected share price swing of 7% post the Tesla (TSLA) earnings release. Significantly, Tesla nosedived 9% following its last earnings unveiling. Rivian Automotive (RIVN) and Polestar Automotive (PSNY) have been the stocks most closely correlated with Tesla on earnings day over the past year. Meanwhile, the soaring short interest in the EV sector—encompassing companies such as Fisker (FSR), Lucid Group (LCID), VinFast Auto (VFS), Workhorse Group (WKHS), Canoo (GOEV), and NIO (NIO)—could provoke heightened activity subsequent to Tesla’s earnings update and the ensuing 5:30 p.m. conference call.

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