Tesla, led by Elon Musk, has been a leader in electric and autonomous mobility. As the company prepares to report its Q4 Earnings to wrap up the fiscal year 2024 this Wednesday, the question arises: will the stock be bullish or bearish? This article analyzes past earnings and next-day price movements to determine whether Tesla is a buy or sell.
Rafael Villasenor
January 26th, 2025
The most recent earnings report launched Tesla into a bull run to reach an all time high of 1.54T Market Capitalization, breaking past the resistance level of $270 that launched bears into defensive mode. The day after earnings, the stock had jumped near 22% - it's biggest day in over a decade. This comes after beating multiple Wall Street expectations of Tesla's performance, including the Earnings Per Share (EPS) that was beat by 21%. Not to mention, Elon stated that delivery growth in 2025 can be as high as 30%, beating the 10% Wall Street estimate.
However, the previous quarters earnings report was not as bullish. The stock dropped 12% the day after earnings, as the EPS was missed by 15%. This reflects certain troubles the company was having when reflected on a YoY basis. At first glance, we see the increase in revenue and think to ourselves: isn't this good news? The company is making more money! However, the EPS helps us understand what is really going on behind the number of this revenue. Teslas profit margins have been getting squeezed, as in Q2 2023 they made $2.7B on a revenue of 24.9B. This quarter, they reported $1.5B profit on a revenue of 25.5B, highlighting it's struggle to manage its capital correctly.
Based on the previous five earnings reports (including the three shown below), it’s evident that Tesla’s stock consistently moves more than 10% following earnings announcements. Given the high expectations from analysts and the heightened -negative- publicity surrounding Elon Musk, a significant price movement is highly likely. We’ll explore potential directions later in this post, but this presents a strong opportunity to capitalize on option contracts or LEAPS for substantial profits.
| Quarter | Revenue Forecast | Revenue Actual | EPS Forecast | EPS Actual | Percentage Margin | End of Day Stock Movement |
|---|---|---|---|---|---|---|
| Q3 2024 | $25.47B | $25.18B | 0.59 | 0.72 | 21.34% | +22% Increase |
| Q2 2024 | $24.52B | $25.50B | 0.61 | 0.52 | -15.23% | -12% Decrease |
| Q4 2023 | $25.57B | $25.17B | 0.73 | 0.71 | -2.8% | -12% Decrease |
Tesla’s Q4 2023 vehicle deliveries reached 495,570, slightly up from 484,507 in the same quarter last year but below the 512,250 consensus estimate. Production totaled 459,445 vehicles, falling short of the 503,500 expected by analysts and the nearly 500,000 produced in Q4 2022. For the full fiscal year, Tesla delivered approximately 1.79 million vehicles, narrowly missing the 1.8 million estimate, and produced 1.77 million vehicles, below the projected 1.82 million. Both deliveries and production showed year-over-year declines.
Analysts are currently expecting a EPS of $.76 per share, a $.4 increase from last quarter. The revenue forecast is set at 27.22B, a near $2B increase from last quarter. Tesla deployed 11.0 GWh of energy storage in Q4 2024, representing a 243% year-over-year increase. With strong demand for Megapack and Powerwall products, the energy segment is expected to generate $2.6 billion in revenue, an 80% increase YoY. This means Tesla is more than likely to beat the revenue forecast, but the EPS is still up in the air. Due to the profit margin compressions Tesla has been facing, the guarantee of them hitting the EPS forecast is slim, which might bring us down towards the $370 support level.
Beyond the financials, analysts are divided on how Elon Musk’s public and political affiliations might impact Tesla’s stock performance. Musk’s close ties with the Trump Administration and his role within the Department of Government Efficiency (DOGE) have led some to believe that this relationship could pave the way for smoother regulatory approvals, such as new versions of Tesla’s self-driving software and autonomous “robotaxis.” However, this political alignment has also alienated some individuals, as Tesla’s association with the Republican Party has become a polarizing factor for potential investors and customers.
The bad news isn't over just yet - competition from Chinese EV manufacturers has been heating up for Tesla worldwide. Earlier this year I was back home in Mexico, where I saw an unusual car brand i've never seen before. I knew it was an EV, as it resembled a Tesla in some ways, but after a deep dive, I discovered the chinese EV maker BYD (Build Your Dreams) which can start as low as $10,000. Current rising Chinese EV competitors include brands like
There's an aggressive price war being fought between the EV brands as people begin to seek more affordable options. This includes Tesla slashing 10,000 - 14,000 Yuan off of their best selling Tesla Models that sell for 240,000 Yuan, as well as some loan options to make the car more affordable. Still, the BYD brand, which holds about 34% market share, outdid Tesla with it's best selling model priced at 136,000 Yuan, a price significantly cheaper for consumers.
This isn't to say that Tesla will be de-throned over night, but the reality is there is significant and subtle changes in the world within the EV sector. Below is a map of the countrys the Chinese manufacturers have been expanding too. These are populous countries that will most likely seek affordable substitutes to vehicles like Tesla.
In my view, Tesla’s stock is poised to drop more than 10% following its earnings announcement, potentially nearing the $370 support level. The stock has already been experiencing downward momentum, and I believe this trend will continue as the earnings report amplifies existing concerns. Factors like compressed margins and uncertain sentiment around Tesla’s current trajectory may weigh heavily on the stock, driving it further south. While Tesla’s long-term growth prospects remain promising, I expect short-term volatility to dominate in the wake of this announcement.
For investors looking to capitalize on this movement, I recommend considering put options or shorting the stock to profit from the anticipated decline. One last disclaimer, though, this isn't financial advice because what the hell do I know! It's always important to note that the data is only as correct as the source it comes from, and the future is always uncertain when dealing with predictive analysis, especially financials.
Below, I'll place a screenshot of the level I'll be anticipating. Thanks for reading my article, I hope this was of any value, and we'll see how this plays out Wednesday afternoon!
