What is next for Tesla stock after soft Q1 sales report

Tesla (NASDAQ:TSLA) stock price continued its recent decline on Tuesday after the electric vehicle (EV) company published its first-quarter vehicle production and deliveries report for 2024. Here’s what investors need to know: 

Tesla Q1 Sales Report for 2024

The TSLA report revealed deliveries fell 8.5% from the year-ago quarter and approximately 20% from the fourth quarter representing the first year-over-year decline since the second quarter of 2020.

The Elon Musk-led company reported total first-quarter deliveries of 386,810, while total first-quarter production was 433,371. Vehicle production fell around 1.7% year over year.

Reacting to the report, analysts at Oppenheimer said TSLA deliveries disappointed “even the most bearish expectations,” and they “believe sustainable GM levels will be the key concerns for investors as the company transitions toward increased recurring revenue.”

Meanwhile, analysts at Wedbush went further, describing it as “an unmitigated disaster 1Q that is hard to explain away.”

“We view this as a seminal moment in the Tesla story for Musk to either turn this around and reverse the black eye 1Q performance. Otherwise, some darker days could clearly be ahead that could disrupt the long-term Tesla narrative,” said Wedbush.

Is Tesla a Good Investment?

Wedbush added that it “remains bullish on the long-term story,” given the prospects for growth and EV/FSD over the coming quarters, but added that “this was a train wreck into a brick wall quarter for Musk & Co. with our estimate that China was down at least 3% YoY.”

The firm maintained its Outperform rating and $300 price target on the stock. However, they stated: “With the ongoing debacle around margins, production and ongoing macro events, Musk will need to quickly take the reins back in to regain confidence in the eyes of the Street with a big few quarters ahead.”

Oppenheimer is more cautious on the stock, keeping its Perform rating on Tesla in its note. 

The firm expects bearish investors to point to inventory build in the quarter, ”which amounts to 11 days based on 1Q24 deliveries as a signal of softening demand and a drag on ongoing GM.”

“While that inventory build is not a large number, we believe directionally it will not be well-received as should be largely digested in 2Q24,” they added. “We expect bulls to point to 2Q24 price increases and model transition supporting demand to signal 1Q24 as the bottom on deliveries and GM.”

Overall, while Oppenheimer remains on the sidelines for now, they expect shares to be weak into Tesla’s April 23 earnings.

Is TSLA Stock Price Dropping?

Following the report, Tesla’s share price has declined about 5%. At the time of writing, it trades at $166.69 per share. 

The electric vehicle giant is now down more than 33% this year, while over the last 12 months, it has posted a more than 17% decline. 

Tesla Stock Forecast 2024 & 2025

In March, before the latest deliveries report, Garrett Nelson, a senior equity analyst at CFRA Research, told Investing.com that “the YTD decline in the stock price was overdue after it more than doubled last year and that more bearish expectations related to Tesla’s growth are now priced in, presenting a buying opportunity.”

Stephanie Valdez Streaty, director of Industry Insights at Cox Automotive, commented:

“Our forecast is for Tesla to underperform the overall market, and end Q1 with its lowest-yet share of the EV segment,” Valdex Streaty told Investing.com. 

“Like many auto makers, Tesla has to manage through its slow-growth periods. It has not ramped up Cybertruck volume, and its two core products – Model 3 and Model Y – have been in-market for a long time.”

“The two core Tesla products are excellent vehicles, but the auto industry revolves around “new” models and fresher alternatives from competitors are likely slowing Tesla demand.”

Analysts at Wells Fargo downgraded Tesla to Underweight (equivalent to sell) from Equal Weight in mid-March, calling it a “growth company with no growth.”

“We expect volumes to be flat in 2024 & down in 2025,” said the firm, which placed Tesla on the its Tactical Ideas List.

“We see headwinds from disappointing deliveries & more price cuts, which likely drive negative EPS revisions.”