Tesla has recently unveiled its fourth-quarter earnings, highlighting a slight increase in profits, yet it fell short of Wall Street's expectations. Despite the company's initiatives to boost electric vehicle sales through zero financing and other incentives, its adjusted net income reached $2.6 billion, or 73 cents per share—below analysts' projection of 77 cents.
Initially, Tesla's stock witnessed a decline in after-hours trading. However, optimism soared when CEO Elon Musk announced a pivotal advancement: the launch of unsupervised “full self-driving” technology as a paid service, expected to deploy in Austin by June. According to Morningstar analyst Seth Goldstein, this represents a significant milestone, moving from theoretical plans to a concrete timeline.
While Tesla continues to face intense competition from traditional automakers and new entrants like China's BYD, its stock has surged over 50% since former President Donald Trump's election. This surge stems from investor hope that Musk's advisory role in the administration may align with favorable business outcomes for Tesla.
In a letter to shareholders, Tesla emphasized its strategy to cut manufacturing costs and make vehicles more affordable. It highlighted one model's price dipping below $35,000—the lowest in its history. Elon Musk reiterated his goal of maximizing production volume for these budget-friendly models, anticipated to commence in the first half of the year.
During an investor call, Musk shifted focus to future ambitions across AI and robotics, signaling confidence in Tesla's potential to become the globe's most valuable company. Currently, Tesla stands as the seventh-most valuable firm in the S&P 500, boasting a market cap of $1.25 trillion. Musk envisions overtaking giants like Apple and Microsoft, acknowledging the path is challenging but not insurmountable.
However, looking back, Tesla's unadjusted profits for the last quarter markedly declined by 71% to $2.31 billion, contrasting a stronger $7.93 billion during the same period in the previous year that benefited from a one-time tax advantage. Revenue nudged up by 2% to $25.7 billion, short of expectations at $27.1 billion, as stated by FactSet.
Tesla's profit margin also narrowed, reaching 16.3% in the fourth quarter, down from 17.6% a year prior. Despite a forecasted dip, quarterly vehicle sales rebounded with a record 495,570 units. Tesla had previously reported a traction decrease, selling 1.79 million cars in the preceding year—the first drop in over a decade—despite promotional offers of 0% financing and attractive leasing options.
Wedbush analyst Dan Ives noted mixed reactions among investors. Proponents see the announcement on autonomous driving as a game-changer, while skeptics focus on missing financial targets. Ultimately, Tesla's movement in the market may heavily depend on its autonomous innovation progress.
Fiscal analysis reveals full-year profits, excluding one-time items, stood at $8.42 billion, reflecting a 23% reduction from the previous year. Wall Street remains ambivalent regarding potential regulatory shifts stemming from Musk's affiliations, as the Trump administration's stance towards reducing EV incentives and loosening emission standards could dampen Tesla's lucrative sale of regulatory credits. The fourth quarter saw $692 million in such credits sold, an income stream at risk should regulatory changes materialize.
