Recap: Tesla Q4 earnings disappoint; Elon Musk talks slowing demand, Cybertruck, and a next-gen vehicle

Musk is managing expectations for Tesla's Dojo, the supercomputer it designed for computer vision video processing and recognition. That's the AI machine behind the new version of Full Self-Driving.

The CEO says it's a risky project that is high risk and high reward.

How Chinese car companies perform outside their home country will depend on the level of tariffs, Musk says. Last year, China's BYD outsold Tesla for the first time.

"We have found that some of our competitors look at what we do on a frame-by-frame basis and then we find these things being copied," Musk says. "Same thing with battery day."

The main goal is recruiting, Musk adds.

Tesla said it will explore new channels for advertising and educating consumers about its cars, but that it's being "very careful not to overspend."

"This is a production-constraint situation, not a demand-constraint situation," Musk says. "We could dramatically raise the price but that doesn't feel right."

"Admittedly that was not a super utopian situation," he says of the TV show.

Musk says Tesla may ship the first versions of the robot to customers "next year."

Executives say Tesla is working to expand its Nevada Gigafactory to build more electric semi-trucks before it goes full-steam-ahead on other projects like a plant in northern Mexico.

The billionaire says he envies the dual-class stock structure at tech rivals like Meta.

"I just want to be an effective steward of very powerful technology," he says.

He tells investors workers will be practically "sleeping on the line" as they work to ramp production.

"We really need the engineers to be living on the [production] line. This is not an off-the-shelf, 'it-just-works' type of thing," he says.

"I think we're quite far ahead of any other company in the world in terms of AI inference efficiency," Musk says on the call.

Earlier this month, the billionaire said he wanted a 25% stake in Tesla in order to feel comfortable growing AI and robotics at the carmaker.

Retail investors are voting on their top questions for the earnings call. 

Here are the top three questions on Say, a website that allows companies to interact with investors:

• "Given that you moved the start of the next generation compact vehicle production to Austin, has the timeline improved so that we might see next generation platform vehicles in 2025?"
• "What has been the barrier to ramping 4680 cells into the multi million cells per week rate and when do you expect to get there?"
• "Should retail shareholders be concerned that Elon has stated he is uncomfortable expanding AI and robotics at Tesla if he doesn't have 25% of voting?"

Tesla's margins have taken a beating as it keeps cutting prices. Luckily, its production costs have also fallen significantly, helping it keep a leg up on the competition from Ford, General Motors, and others.

Read more.

Tesla pointed to its plans for a new electric car in its earnings release.

"We are focused on bringing the next generation platform to market as quickly as we can, with the plan to start production at Gigafactory Texas. This platform will revolutionize how vehicles are manufactured," the company said.

On Wednesday morning, Reuters reported that Tesla plans to start producing its new EV, which has been codenamed "Redwood," in 2025.

Musk has been promising a mass-market $25,000 EV since 2020.

Tesla missed forecasts for its revenue and earnings over the last quarter, sparking a small selloff in after-hours trading.

Shares were down nearly 4% immediately after the carmaker posted its financials for the fourth quarter. Those losses eased to around 3% in the half hour after it reported earnings.

Including the decline after Wednesday's closing bell, Tesla shares are down 19% year-to-date. The stock is now underperforming the S&P 500 after a spectacular 2023, when Tesla shares more than doubled.

Fourth Quarter Results

• Adjusted EPS: $0.71, estimate $0.73
• EPS $2.27
• Basic EPS $2.49
• Revenue: $25.17 billion, estimate $25.87 billion
• Free cash flow: $2.06 billion, estimate $1.45 billion
• Gross margin: 17.6%, estimate 18.1%
• Capital expenditure: $2.31 billion, estimate $2.32 billion

Source: Bloomberg

All eyes will be on Tesla's profit margins in the new year, according to Deepwater.

"For Tesla earnings it's all about the margins. While I expect a slight improvement over the quarter, I believe the outlook for margins in 2024 will be for stabilization, not expansion," strategists said in a note.

Profit margins could rise back above 20% by 2025. Meanwhile, deliveries could surge from an expected 17% growth this quarter to 24% in that timeframe, strategists estimated.

Tesla still has long-term growth potential. Just look at the company's rising pace of production and deliveries, CFRA senior stock analyst Garrett Nelson said in a note.

Last year, Tesla's deliveries surged 38% and production rose 35% to notch 1.8 million units.

"We view the upcoming release as positive and remain bullish on Tesla even after the stock's stellar performance in 2023, expecting the company to benefit from declining unit costs (particularly plummeting battery costs) and introduce its long-promised mass market EV model later this year," Garrett said.

Electric vehicle demand is bound to soften over the next year. Tesla will have to choose whether it will continue to slash the prices of its cars to remain competitive, or keep its prices stable in 2024, Wedbush analysts said.

Price cuts on some of Tesla's models have paid off so far. Last year, Tesla's stock more than doubled, partly because discounts boosted sales in China.

"Which pricing path Tesla takes will be foundational move for the future of Tesla over the coming years in our view. This will be key focus for the Street tomorrow night to gauge what Tesla anticipates for 2024 around consumer demand globally," the firm said in a note. 

Tesla's growth potential over the long-term is promising, but the company faces key risks in the short-term, Goldman Sachs said. 

"Key downsides to our view relate to potentially larger vehicle price reductions than we expect, increased competition in EVs, delays with products/capabilities like FSD/the third generation platform," strategists warned.

The bank also cited Tesla's "internal control environment," profit margins, and its "high degree of vertical integration" as key risks.

Morgan Stanley says an imbalance of EV supply and demand which could weigh on Tesla this year. Though the world's supply of electric vehicles is on the rise, demand looks to be weakening, analysts said, pointing to indicators like Tesla's price cuts in China, fewer vehicles qualifying for tax incentives, and rental giants, like Hertz, cutting their supply of Teslas. 

"Looking ahead, are we approaching maximum market negativity on EVs? We believe the trough may happen towards the latter part of 2024," the bank said in a note, citing influences stemming from the EU Parliamentary and US presidential elections.

4th quarter

• Adjusted EPS estimate: $0.74
• EPS estimate: $0.62
• Automotive gross margin estimate: 18.5%
• Automotive gross margin ex-credits estimate: 17%
• Revenue estimate: $25.87 billion
• Free cash flow estimate: $1.45 billion
• Gross margin estimate: 18.1%
• Capital expenditure estimate: $2.32 billion
• Cash and cash equivalents estimate: $22.31 billion

1st quarter

• Automotive gross margin estimate 18.9%

Full-year 2024

• Production estimate: 2.14 million
• Deliveries estimate: 2.19 million
• Automotive gross margin estimate: 19.2%
• Capital expenditure estimate: $9.01 billion

Source: Bloomberg