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Tesla share price jumps 13% as Elon throws a Hail Mary
Profits almost halved and investors are scrambling to buy shares. Make it make sense.
Mitchell stumbled upon the concept of investing when in high school, devotedly urging his parents to put some money into a handful of technology companies with increasingly popular products among his demographic – many of which have gone on to great success. It wouldn’t be until 2017, some five years later, that Mitchell became an investor of his own money.
Having studied and worked as a mechanical engineer in the building services industry, Mitchell takes a methodical and analytical approach to evaluating businesses. Rather than relying purely on numbers, Mitchell drills beyond a company’s metaphorical mantle to unearth obscure patterns or competitive advantages that would go otherwise unnoticed.
His expertise resides within areas such as software, consumer goods, and building services equipment. However, his quest to find quality companies that set the industry standard and flex some degree of an impenetrable position has no limits – small cap to mega cap, cosmetics to healthcare – if it’s an exceptional business it’s on his radar.
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It's been a car wreck of a year for the Tesla Inc (NASDAQ: TSLA) share price. Yet, investors are still holding out hope after the automaker's first-quarter results overnight.
Despite missing analyst estimates, shares in the electric vehicle company are up 13% to US$144.60 post-earnings — a welcome sight for shareholders. However, a lot of ground still needs to be covered if Tesla investors hope to finish the year in the green.
Based on last night's closing price, Tesla shares are the worst-performing of the S&P500. The Elon Musk-led company is down 41.8% year-to-date, as shown below. In contrast, the Standard and Poor's 500 is 6.9% higher in 2024.
Is the latest set of numbers the kindling needed to reignite Tesla shares?
The numbers
Tesla's first quarter for FY24 is disappointing in almost whichever way you slice it.
Analysts had tempered expectations earlier in the month after vehicle delivery numbers fell 8.5% year-on-year. Yet, today's figures still fell below the bar.
Total revenue down 9% to US$21.3 billion versus US$22.3 billion estimate
Earnings per share down 47% to 45 US cents per share versus 52 cents estimate
Free cash flow swung to negative US$2.53 billion from positive US$441 million year-on-year
Cash and cash equivalents up 20% to US$26.9 billion
The company's presentation mentioned a few inhibitive factors during the quarter.
Firstly, global EV sales were said to be 'under pressure' as carmakers shifted their focus to hybrids. Secondly, the Red Sea conflict and an arson attack at the Berlin Gigafactory were called out. Lastly, the slow ramp of the updated Model 3 at its Fremont factory presented a challenge in Q1.
Furthermore, Tesla's recent vehicle price slashing cut into the company's revenue and profitability.
Saving grace for Tesla share price
It all sounds unaspiring for an investor… so why is the Tesla share price flying higher in after-hours trade?
Facing a challenging economic environment, it appears Musk now wants to soothe the demand woes. To do so, Musk revealed the company is bringing forward plans for its next-generation, lower-cost model, stating:
We've updated our future vehicle lineup to accelerate the launch of new models ahead of the previously mentioned start of production in the second half of 2025.
So we expect it to be like early 2025, if note late this year. These new vehicles, including more affordable models, will use aspects of the next-generation platform, as well as aspects of our current platforms and will be able to be produced on the same manufacturing lines as our current vehicle line-up.
Source: Tesla 2024 Q1 Quarterly Update Deck
The eccentric CEO also leaned further into Tesla's autonomous ambitions, showing off a robotaxi ride-hailing app, depicted above, in its slides. Musk described how Tesla should be thought of, explaining:
Think of Tesla like, I don't know, some combination of Airbnb and Uber. Meaning that there'll be some number of cars that Tesla owns itself and operates in the fleet. There'll be a bunch of cars where they're owned by the end user, but that end user can add of subtract their car to the fleet whenever they want.
From there, Musk noted the potential for its vehicles to train AI models, likening it to Amazon's AWS.
These comments might be sending the Tesla share price higher despite the weak results.
