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Tesla Earnings: Slower Growth Expected in 2024

Lowering fair value estimate on Tesla stock amid strategic shift to sport utility vehicle production.

Tesla stock story ahead of company earnings. Image of a Tesla Supercharger.

Key Morningstar Metrics for Tesla

What We Thought of Tesla’s Earnings

Our key takeaway from the Tesla TSLA earnings call was the firm’s strategic shift to the development and ramp-up of the new affordable sport utility vehicle, while focusing on cost cuts for its existing vehicles. This marks a change from the 2023 strategy, which was to cut prices to generate strong volume growth. We updated our forecast for lower near-term deliveries growth and lower near-term automotive gross profit margins. As a result, we reduce our fair value estimate on Tesla stock to $200 per share from $210. We maintain our narrow moat rating.

Tesla shares were down 6% in aftermarket trading. We think the market reacted negatively to management’s outlook that Tesla will enter a period of lower growth in 2024. At current prices, we view shares as fairly valued, with Tesla stock trading a little below our updated fair value estimate but in 3-star territory. Accordingly, we recommend investors wait for the stock to offer a solid margin of safety before considering an entry point.

Tesla Deliveries Expected to Slow

This strategic shift will create different near- and long-term dynamics for the company’s deliveries growth. In the near term, we expect deliveries to grow at just 10% and 6% in 2024 and 2025, respectively. This is far below the 50%-plus annual growth that Tesla has generated over the past decade. However, as the company launches its affordable vehicle by the end of 2025, we expect Tesla will resume double-digit deliveries growth in 2026. As the affordable vehicle surpasses the Model 3/Y platform in deliveries, we forecast Tesla will deliver a little over 5 million vehicles by 2030.

We expect different near- and long-term profit margins as well. While Tesla is developing its affordable vehicle and ramping up Cybertruck production, we expect the company will see a period of lower automotive gross margins, in line with the 19% generated in 2023. Over the long term, we continue to forecast margin expansion as Tesla begins to sell its affordable vehicles and benefits from its cost-reduction initiatives.

Tesla Stock Price

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Seth Goldstein

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Seth Goldstein, CFA, is an equities strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers agriculture, chemicals, and lithium companies in the basic materials sector and is also the chair of Morningstar's electric vehicle committee.

Prior to assuming the equity analyst role in 2017, Goldstein was an associate equity analyst covering the basic-materials sector. Before joining Morningstar, Goldstein was a senior financial analyst for Oasis Financial, a financial analyst for Berkshire Hathaway Energy, and a field operations supervisor for the U.S. Census Bureau.

Goldstein holds a bachelor's degree in journalism from Ohio University and a Master of Business Administration, with a concentration in finance, from the University of Iowa. He also holds the Chartered Financial Analyst® designation.

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