Source: PaxForex Premium Analytics Portal, Fundamental Insight
Tesla's stock has had a roller-coaster year, rallying after its third-quarter earnings report and an encouraging forecast for future deliveries. After rebounding from early 2024 losses, the stock is currently trading close to breakeven for the year. This recent uptick reflects Tesla's efforts to recover momentum in an increasingly competitive electric vehicle (EV) market and its ambitious plans to lead in autonomous driving technology.
The company continues to promote its ambitions for fully autonomous vehicles and its upcoming robotaxi service, previewed earlier this month. Below, we break down Tesla’s latest earnings, CEO Elon Musk's comments, and whether this is the right moment for investors to buy Tesla stock.
Following a dip in the first half of 2024, Tesla's vehicle deliveries saw a 6% increase in Q3. Model 3/Y deliveries climbed by 5%, totaling 43,668 vehicles, while other models, including the Cybertruck, had an impressive 43% increase, reaching 22,915 vehicles. Tesla’s production also saw positive momentum, with total vehicle production for Q3 up 9% to 469,796 units. Model 3/Y production grew by 6%, and production of other models jumped by 91%, signaling Tesla's focus on diversification within its vehicle lineup.
Tesla’s automotive revenue in Q3 edged up 2% to $20 billion, largely supported by regulatory credits, which increased by 33% to $739 million. These credits, which Tesla sells to other automakers to help them meet environmental standards in certain regions, are a valuable yet unpredictable source of revenue. Regulatory credits are often treated as pure profit, contributing significantly to both gross margins and overall profit. This quarter, regulatory credits boosted Tesla’s gross margins by 195 basis points, reaching 19.8%.
Revenue growth extended beyond automotive sales, with Tesla’s total revenue for Q3 increasing by 8%, reaching $25.2 billion. This includes a 52% surge in Energy Generation revenue to $2.4 billion, driven by Tesla's growing investments in solar and energy storage solutions. Service and Other revenue, which includes income from repairs, merchandise, and insurance, rose 29% to $2.8 billion, highlighting Tesla’s success in diversifying its revenue streams.
Despite a slight revenue miss, Tesla posted solid adjusted earnings per share (EPS) growth of 9%, reaching $0.72 and exceeding the $0.58 consensus forecast from LSEG. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) climbed by 24% to $34.7 billion, marking a strong financial position that underscores Tesla’s operational resilience.
Looking to the future, Tesla’s outlook for 2025 appears upbeat. Musk predicted a delivery increase of 20% to 30% next year, surpassing analysts' forecast of 15% growth. This optimism is underpinned by Tesla’s plans to introduce more affordable models in the first half of 2025. Although Musk did not disclose details, rumors hint that the company might reintroduce the Model 2, a lower-cost EV, to cater to budget-conscious consumers. Additionally, Tesla has indicated plans to launch a two-seat robotaxi priced at approximately $30,000 by 2026. While Tesla has long hinted at expanding its lineup to more accessible price points, specifics about these models remain vague.
Tesla remains committed to autonomous driving as a key part of its future, with Musk expressing confidence that its entire fleet will achieve full autonomy by 2025. Tesla is already producing 35,000 autonomous-capable vehicles weekly, with over 7 million vehicles in the market ready for potential autonomy. In select Bay Area locations, Tesla is reportedly allowing customers to hail rides from its robotaxi service, though with a safety driver. However, Tesla appears to lack the required ride-hailing license in California, based on information from the California Public Utilities Commission’s website. This suggests that regulatory hurdles could delay Tesla’s robotaxi rollout, especially as the company navigates regulatory scrutiny around its full self-driving technology.
Despite encouraging delivery figures, Tesla’s growth in core automotive revenue (excluding regulatory credits) has been modest. In Q3, automotive revenue outside regulatory credits rose by only 1%, highlighting limited growth from its primary business. Tesla’s reliance on regulatory credits, a high-margin but unpredictable revenue source, raises questions about the sustainability of its earnings growth if demand for these credits declines.
Musk’s prediction of a 20% to 30% delivery increase in 2025 appears ambitious, given current market conditions. EV sales growth has recently decelerated, and Tesla faces rising competition, both from traditional automakers like Ford and General Motors and newer EV entrants like Rivian and Lucid. In China, the largest EV market, Tesla contends with local players and an ongoing price war, which has pressured margins. While Tesla has alluded to a more affordable model in 2025, specifics remain uncertain. During the earnings call, Musk dismissed the idea of a $25,000 car as “silly” and “pointless,” casting doubt on Tesla’s commitment to more accessible price points in the near term.
While Tesla has made strides in autonomous driving, it has yet to achieve fully driverless capabilities. The National Highway Traffic Safety Administration (NHTSA) is actively investigating Tesla's full self-driving system due to ongoing incidents, and Tesla’s camera-only technology has been scrutinized for safety concerns. Regulatory approval from the NHTSA would also be necessary for Tesla's Cybercab to operate.
Overall, Tesla’s earnings report was moderately positive, with notable support from regulatory credits. However, given the uncertainty around delivery growth, intensified competition, and challenges in achieving regulatory approval for its autonomous vehicles, caution may be warranted. While the recent rally in Tesla’s stock price has excited investors, those considering an investment may wish to wait for further clarity on Tesla’s upcoming models, autonomy developments, and competitive positioning in a rapidly evolving EV market.
As long as the price is above 250.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 268.23
- Take Profit 1: 280.00
- Take Profit 2: 300.00
Alternative scenario:
If the level of 250.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 250.00
- Take Profit 1: 230.00
- Take Profit 2: 210.00
