Tesla's after-hours trading surged by over 10%! Q1 revenue and EPS below expectations, will accelerate the launch of affordable models early next year

According to Zhitong Finance APP, Tesla (TSLA.US) reported lower-than-expected revenue and adjusted earnings per share for the first quarter of the first quarter, due to continued price cuts and weak demand. However, Tesla CEO Musk stated that the production of the new affordable model may start earlier than expected. Boosted by this news, the stock price surged more than 10% in after-hours trading on Tuesday.

The financial report shows that Tesla's first-quarter revenue was $21.301 billion, below analysts' expectations of $22.15 billion, a 9% decrease from $23.329 billion in the same period last year, marking the largest year-on-year decline since 2021. By business segment, automotive revenue was $17.378 billion, down 13% year-on-year; energy generation and storage revenue was $1.635 billion, up 7% year-on-year; and services and other revenue was $2.288 billion, up 25% year-on-year.

Net profit attributable to common stockholders was $1.129 billion, a 55% decrease from $2.513 billion in the same period last year, hitting the lowest level since 2021. Adjusted earnings per share were $0.45, below analysts' expectations of $0.51.

Gross profit was $3.696 billion, down 18% year-on-year; gross margin was 17.4%, a 1.9 percentage point decrease from 19.3% in the same period last year, but better than analysts' expectations of 16.5%. Operating profit was $1.171 billion, down 56% year-on-year; operating margin was 5.5%, a 5.9 percentage point decrease from 11.4% in the same period last year. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were $3.384 billion, down 21% year-on-year; adjusted EBITDA margin was 15.9%, a 2.4 percentage point decrease from 18.3% in the same period last year.

Net cash provided by operating activities was $242 million, a 90% decrease from $2.513 billion in the same period last year. Capital expenditures were $2.773 billion, a 34% increase from $2.072 billion in the same period last year. Free cash flow was -$2.531 billion, below analysts' expectations of $654 million, compared to $441 million in the same period last year. Tesla attributed the negative free cash flow to a $2.7 billion increase in inventory and $1 billion in "artificial intelligence infrastructure" capital expenditures At the close of trading on Tuesday, Tesla's stock price has plummeted by over 40% year-to-date to its lowest level since January 2023, as concerns mount over weak delivery volumes, intensifying competition, and the impact of ongoing price cuts on gross margins. Tesla reiterated its pessimistic outlook for 2024, stating that "sales growth rates may significantly lag behind those of 2023."

Earlier this month, data released by Tesla showed first-quarter deliveries of 386,810 vehicles, a 9% year-on-year decline, significantly below the market's expectation of 449,080 vehicles, marking the first year-on-year decline since 2020; vehicle production stood at 433,371 vehicles, down 2% year-on-year.

Tesla stated that it is accelerating the introduction of "new models, including more affordable models," which will be "able to be produced on the same production lines as Tesla's existing product line." Tesla aims to fully utilize its current capacity and achieve "over 50% production growth compared to 2023" before investing in new production lines.

During the earnings call, Musk expressed that the adoption of electric vehicles globally is under pressure, but he still believes that electric vehicles will dominate the automotive industry in the long run. He also mentioned that lower-priced models will start production even if not later this year, beginning in early 2025, and will incorporate the company's self-driving technology.

Musk also highlighted the rapid development of Tesla's artificial intelligence computing capabilities. He mentioned that Tesla is in negotiations with at least one major automaker regarding FSD licensing. When asked about Optimus, Musk stated that he expects the company to start selling these humanoid robots by the end of next year. He still believes that Optimus could be Tesla's biggest business.

Following the earnings release, CFRA analyst Garrett Nelson stated that the publication of this earnings report will significantly help restore investor confidence in Tesla's overall narrative and prove that its valuation premium is justified, as the company is a high-tech company, not just an automaker However, analyst Ahan Vashi pointed out that Tesla's free cash flow was negative in the first quarter. He warned, "Although Tesla has $26 billion in cash reserves, if there is an economic hard landing, the situation could quickly become unstable." He noted that Tesla will introduce cheaper models to bridge the gap between two growth waves, but this may not alleviate demand concerns. He believes that selling pressure on Tesla's stock may resurface in the coming trading days