Bracing for Pain: Tesla Q1 Earnings Results Are Upon Us

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Tesla (NASDAQ:TSLA) started the whole electric-vehicle (EV) craze, but it might also be the one that ends it. Even though the automaker hasn’t released its latest quarterly results yet, the sense of disappointment is palpable. However, this may present an opportunity.

Since Tesla still trades at 34 times its trailing, GAAP-measured earnings (that’s double the sector’s median P/E ratio), I’m still not prepared to call its stock a good value. Nonetheless, if the company serves up another swing-and-a-miss quarterly report, its share price might actually drop to a level that even true-blue value seekers should find hard to resist.

Tesla’s not-so-magnificent quarter

There’s no entity with the power to drop Tesla from the informal Magnificent Seven list. However, when the next trending list of elite stocks comes around, don’t be surprised if Tesla isn’t on it.

Along with a precipitous year-to-date share-price decline, the company has delivered one blow after another to its loyal stakeholders. Amid a backdrop of soft EV demand and higher-for-longer interest-rate policy, CEO Elon Musk just can’t seem to drum up much enthusiasm for an automaker that was once a darling of the financial markets.

The wave of disappointment started in earnest when Tesla dropped its fourth-quarter financial report. Tesla stock tanked 12.1% after the release of that report, touching its lowest price in seven months.

It was a truly awful quarter. Wall Street had expected Tesla to have earned 73 cents per share, which would have represented a substantial earnings decline. The actual result though was worse than that: Q4 2023 earnings of 71 cents per share — down a whopping 40% year over year.

As awful as that was, it turned out to be just the start of an ill-received series of events for Tesla. The company ditched its plans to introduce a low-priced EV in China due to fierce competition in that country’s automotive market. Moreover, Musk became obsessed with robo-taxis, and Tesla promised to unveil a robo-taxi model in August. However, the market just yawned and grumbled.

More recently, Musk dug his heels in and doubled down on his robo-taxi fetish. The market wanted and needed this like a hole in the head, and Tesla stock continued its slippery slide.

More fodder for the bad-news bears

The unfavorable news items just kept on coming. Tesla announced that it was laying off more than 10% of its workers. That’s a sizable workforce cut for a company that seemed unstoppable as recently as 2021.

Wedbush analyst Dan Ives called the layoffs an “ominous signal that speaks to tough times ahead for Tesla.” I tend to concur; it’s a time of unfortunate reckoning as Tesla undoubtedly over-hired during the good times and now must let workers go during the not-so-good times.

In a fresh update to this story, Tesla just disclosed plans to eliminate its “growth content” (i.e., marketing) team.

In a post on his X social network, Musk publicly maligned the content team’s work, writing, “The ads were far too generic — could’ve been any car.”

While Tesla will shed many workers, it’s also losing at least two executive-level employees. With the departures of Senior Vice President Drew Baglino and Rohan Patel, vice president of public policy and business development, Tesla will now have to navigate a C-suite transition as well.

I could go on and on. Tesla just drastically reduced the price of its self-driving technology and cut the prices of its Model Y, Model S and Model X vehicles by $2,000. It also cut the prices of some vehicle models in China and in Germany.

Nothing left to lose?

The only bullish argument left for Tesla stock may be that there’s nowhere to go but up, at least in the short term. After all, contrarian investors are supposed to pounce on pessimism — right?

Perhaps, as the market is quite pessimistic in the wake of Tesla’s abysmal fourth-quarter report. The company is preparing to release its first-quarter financial data on Tuesday after the market closes, and the prevailing sentiment is muted at best and nihilistic at worst.

Granted, the results shouldn’t be a complete surprise to anyone as Tesla already published its first-quarter delivery results. As it turns out, the automaker delivered approximately 387,000 vehicles and produced over 433,000 units during the quarter.

Investors hated, hated, hated those numbers. Wall Street had expected Tesla to produce 452,976 vehicles and deliver 449,080; as a result, the share price dropped nearly 5% on the data release.

Now let’s see if rock-bottom expectations can actually lead to a not-as-bad-as-expected surprise when Tesla announces its next set of quarterly financial results. I wouldn’t touch Tesla stock with a 10-foot pole at this point, but there may be an interesting short-term trade here for speculators who like to zig when everybody else zags.