Is Tesla Ending The Growth Narrative?
Of course this is written before the earnings call which might give more clarity, but I'm struggling to have a strong postive or negative bias on the earnings report.
There are distinct positives, including:
1) Automotive COGs dropping nicely. Margins should be near bottom, though the usually weakest Q1 might be the actual bottom.
2) Operating margin up is big as this ultimately feeds into earnings. Legitimate chance this is the bottom.
3) Cash flow and cash-reserves trending nicely. Tesla is financially secure, unlike other OEMs who can't throw their hat into the EV ring any further without getting their financials rekt.
But there are also negatives, including:
1) Explicit stating growth is slowing and more glaringly removing the 50% CAGR target from forward looking statements. Financial institutions are obviously using growth in their DCF models. Sure if 2024 is only 10% unit growth, that could be discarded, but by removing this statement, Tesla is opening up institutions to remodel their DCF valuations lower simply because of lower assumed average growth moving forward.
2) Absolutely no mention of 4680. I mean this is the biggest limit on volume growth and cost reductions in the next few years, and there's literally 0 mentions of it?!
3) If it wasn't before I hope it's obvious to you now. Tesla is demand constrained. Growth is quite likely limited because any further volume expansion would require signficant further price cuts that would eat into cash flow. The price elasticity sucks. This is evident by looking at the growth over last 4 quarters - the volume growth is minimal while ASPs have gone down signficantly.
So it's hard to determine what the sentiment will be for this earlier part of the year. There's a mix of good and bad.
There is an endless list of reasons for people’s current upset with the SP, but nowhere near the top, let alone on this planet, is the reason because the SP didn’t appreciate in a calm, collected, calculated, and measured manner.
No, my point was that people oversimplisticly think it unfair that the share price is lower than it was 2 years ago, even though arguably the company is in better shape.