As Tesla Reports Q4 Earnings, Could U.S. EV Stocks Go from Electric Slide—to Glide?

Last year was a tough one for the electric vehicle (EV) industry in general and Tesla (TSLA) in particular. Will TSLA’s Q4 results on Wednesday shine new light on EV innovation and pricing-related consumer acceptance?

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4 min read
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Key Takeaways

  • Will Tesla’s recent price cuts represent a trial balloon—or a watershed moment for hesitant U.S. electric vehicle (EV) buyers?

  • Where will heavy-duty EV truck growth land in ’23 after Washington’s help? 

  • Other things to listen to in TSLA’s call include possible negative impact of high rates, TWTR impact, and chances for layoffs

Alex Coffey, Trading Strategist, TD Ameritrade

Leave it to Elon Musk to make potentially sector-changing news at Tesla (TSLA) mere days before its Q4 earnings report arrives tomorrow. Its dramatic price decrease across Tesla’s product line came despite another tough year for electric vehicle (EV) manufacturers and the auto industry as a whole—yet so far, Wall Street likes what it sees.

The Wall Street Journal, citing FactSet on Monday, indicated that 64% of analysts following TSLA have declared “buy” or “overweight” ratings on the stock, the most since 2014.

Will some of that enthusiasm rub off on TSLA’s closest EV rivals Rivian (RIVN) and Lucid Group (LCID) when they report in February (more below)? Tune in after Wednesday’s close.

Cutting through distractions

After a year with so much discussion about Tesla (TSLA), which arguably had more to do with the activities of Musk and Twitter (TWTR), the world’s largest EV maker has definitely accelerated news going into its earnings announcement and call, including: 

  • Tesla just wrapped up its worst stock performance on record, losing 65% of its value during 2022—but as of early today, its shares have rebounded more than 30% year to date.
  • Deliveries missed in 2022. Although TSLA shipped roughly 40% more vehicles in 2022 than 2021, it fell short of the original 50% projection due largely to supply chain problems and other industrywide issues.
  • Tesla recently slashed prices up to 20% on some of its vehicles, making the biggest price cuts on its baseline Model Y compact. That put that particular model under the $55,000 price cap that could potentially help certain additional buyers qualify for a full federal $7,500 EV tax credit.

Analysts expect Tesla’s Q4 top- and bottom-line results to climb more than 30% for the quarter year over year, though many investors might want to see what these steep price cuts do to the automaker’s future margins. According to Zacks Equity Research, TSLA has beaten consensus earnings estimates each of the past four quarters.

What to listen for on TSLA’s call

State of the prospective EV car buyer: Even with the record-setting Kelly Blue Book price for a new conventional U.S. automobile at $48,681 as of year-end 2022, Tesla faces several challenges converting U.S. mass-market auto customers to EV ownership, despite its price cuts. Here are two:

  • Nearly 7 in 10 prospective EV buyers expect to pay less than $50,000 for their next vehicle, according to a survey conducted last fall by Deloitte. More than half of respondents said a lack of affordability was their biggest concern about EV adoption.
  • A July AAA survey of prospective EV owners pointed to such issues as lack of charging locations (60%) and battery range anxiety (58%) as major drawbacks to purchase. In December, Musk said TSLA will open its Supercharger fast-charging station network to non-Tesla owners. Key questions include how many major U.S. and global automakers designing EVs will sign on to Tesla’s charging standard, and whether Tesla can expand its network to serve competitors fast enough.

How commercial EV development may expand: PepsiCo (PEP) said last year it plans to add 100 heavy-duty Tesla Semis in 2023 for California deliveries to major retailers like Walmart (WMT) and Kroger (KR) and invest in TSLA’s own charging technology at its facilities. Rivian’s EV delivery van deal with Amazon is ongoing but mainly for smaller deliveries. Investors may want to listen for:

  • Whether other major companies are considering the TSLA standard for their heavy-duty EV needs
  • Whether the Inflation Reduction Act’s (IRA) clean vehicle tax credits passed last August are starting to accelerate orders

Where the economy comes in: On February 1, the Federal Open Market Committee (FOMC) is expected to announce a 25-basis-point hike in the fed funds rate, matching its March 2022 increase, according to the CME FedWatch Tool. On the macroeconomic front, see if Tesla’s executives address:

  • Any negative impact in sales related to rising rates on revolving consumer debt
  • Current status of supply chain issues or cost levels
  • Chances of new layoffs and hiring freezes in the current quarter

And yes, there might be one final elephant in the room investors might want to hear about: Musk’s leadership of TWTR and how it’s affecting TSLA. Depending on how that question gets answered, it could grab plenty of headlines.

RECHARGING? The Dow Jones U.S. Automobiles Index ($DJUSAU—candles) has finally begun to move upward but remains down more than 25% over the past three months. However, major U.S.-based EV manufacturers Tesla (TSLA—pink line), Rivian (RIVN—blue line), and Lucid Group (LCID—orange line) have more ground to recapture. Will their upcoming Q4 results and guidance help? Data source: S&P Dow Jones Indices. Chart source: The thinkorswim® platformFor illustrative purposes only. Past performance does not guarantee future results. 

Latest consensus

Here’s a review of key numbers to keep in mind as U.S. EV firms report:

Tesla (TSLA)

Scheduled report date: Wednesday, January 25, after the closing bell

  • Expected Q4 EPS (analysts’ consensus): $1.13
  • Year-ago EPS: $0.85
  • Expected year-over-year EPS change: +32.9%
  • Expected Q4 revenue (analysts’ consensus): $24.03 billion
  • Year-ago revenue: $17.72 billion

Rivian Automotive (RIVN)

Scheduled report date: Tuesday, February 28, after the closing bell

  • Expected Q4 loss per share (LPS) (analysts’ consensus): –$1.93
  • Year-ago LPS: –$2.43
  • Expected year-over-year LPS change: –20.6%
  • Expected Q4 revenue (analysts’ consensus): $747.96 million
  • Year-ago revenue: $54 million

Lucid Group (LCID)

Scheduled report date: Tuesday, February 22, after the closing bell

  • Expected Q4 loss per share (LPS) (analysts’ consensus): –$0.41
  • Year-ago LPS: –$0.21
  • Expected year-over-year LPS change: +95.2%
  • Expected Q4 revenue (analysts’ consensus): $327.01 million
  • Year-ago revenue: $26.39 million

Happy trading,

Alex

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Key Takeaways

  • Will Tesla’s recent price cuts represent a trial balloon—or a watershed moment for hesitant U.S. electric vehicle (EV) buyers?

  • Where will heavy-duty EV truck growth land in ’23 after Washington’s help? 

  • Other things to listen to in TSLA’s call include possible negative impact of high rates, TWTR impact, and chances for layoffs

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