Tesla

Tesla's December results and outlook effectively pushed back the positive inflection point in the business by a year. Now it looks to be the second half of 2025 before revenue growth will accelerate. In the near-term, shares will likely drift lower in what will be a vacuum of good news. By mid-year, details of the next-gen platform will arrive and anticipation of new models should mark a positive turning point in TSLA shares. Bigger picture: as traditional auto retreats from EVs, Tesla remains in attack mode.

For Tesla earnings it's all about the margins. While I expect a slight improvement quarter over quarter, I believe the outlook for margins in 2024 will be for stabilization, not expansion. In 2025 I see margins rising back above 20%. As for deliveries, they grew at 38% in 2023 and are expected to grow at 17% in 2024, accelerating to 24% growth in 2025. I'm also looking for growth to step up next year.

Over the last seven years, we’ve made a habit of offering a few predictions for the year ahead. Here’s what we’re anticipating for 2024: IWO will outperform the S&P500. The iShares Russell 2000 Growth ETF (IWO) will outperform the SPDR…

The Cybertruck was released at a price 25% higher than most were expecting. That means demand will be limited for the next couple of years until pricing comes down. Importantly, the Cybertruck is the latest evidence that Tesla makes the best electric vehicles in the world and is pulling ahead as traditional auto mistakenly slows their EV pursuit.

Over the past month, there has been a surprise twist in the battle between Big Auto and Tesla: Traditional carmakers are slowing investment in EVs and autonomy. While the move is good for traditional auto profits over the next 1-3 years, it will likely make the inevitable EV transition more costly. In the end, I believe Tesla will emerge in a better long-term competitive position.

Tesla's September results and outlook commentary revealed a double whammy of pressures on the business, prolonged margin pressure, and dampened demand outlook. While this next year will be the most difficult period for the company since the ramp of Model 3 in 2019, I believe the long-term opportunity remains intact: The company has a pole position in what will be a massive market transition to electrification.

For Tesla earnings it's all about the margins. While I expect a miss in September, I believe margins will rebound in December. In this scenario, the case that Tesla should be viewed as a tech company will remain intact.

Big auto is in a tight place when it comes to transitioning its business to electric, and the current UAW discussions will eventually result in a steep increase in costs that will further push them into the red. Tesla, however, can afford the pay raise and will emerge as the winner from the labor talks.

Tesla's June quarter results were solid, as expected. Shares of TSLA traded down by 4% off management comments that implied auto gross margins will be down slightly in September due to production downtime for retooling and other investments. The hyper focus on near-term margins overlooks the long-term value the company is creating by aggressively investing in new models, production capacity, batteries, and FSD, all of which will lead to increasing margins over time.

Tesla's March quarter results took backstage to Elon Musk's earnings call comment that the company could sell vehicles (the hardware) at no profit because they could make "tremendous economics in the future through autonomy" software. This razor and blades model would require investors to rethink the Tesla investment case. In the end, I believe the company will strike a balance between margins and growth similar to what was just reported.

The DOE announced changes that make it easier for car makers to qualify for EV tax credits by adding Japan and South Korea to countries that can supply the anode and cathode to battery cells assembled in the US. This is a long-term headwind to the US gaining electrification independence.

Tesla’s investor day ended up being mostly about illuminating the wide lead Tesla has on other car makers. The much-anticipated topic of a Master Plan 3 outline left me with more questions than answers. We do know it will include at least two new models that are, at the earliest, a couple of years away. Big picture; investor day gave me confidence Tesla remains comfortably ahead of other automakers and has a plan for how to significantly ramp deliveries.