Barclays says Tesla's latest quarter will miss estimates and pressure Musk to deliver plan on earnings call

Published Wed, Apr 17 20249:32 AM EDTUpdated Wed, Apr 17 202410:03 AM EDT

Pressure is mounting on Elon Musk to turn the wheel of his embattled electric-vehicle company when it reports first-quarter earnings, according to Barclays. "Tesla's deeply challenged near-term fundamentals are taking the backseat to a much larger issue, as Tesla is facing an investment thesis pivot," wrote analyst Dan Levy in a note to clients on Wednesday, adding that investors should brace for the earnings call to be a negative catalyst for shares. The comments from Barclays come amid a rocky start to 2024 for the largest U.S. electric-vehicle maker. Shares have lost more than a third of their value this year alone as Tesla grapples with slowing demand at home and competition in China. Tesla this week announced plans to eliminate more than 10% of its workforce. Given that, Levy retained his equal weight rating on shares but slashed his 12-month price target by 20% to $180 from $225. Even the new, lower target implies about 15% upside from Tuesday's close. Levy expects the Austin, Texas-based Tesla to miss Wall Street expectations and report gross profit margins below consensus estimates in reporting results next week. Free cash flow may also come in negative for the first time since the first quarter of 2020, with Levy noting that commentary will do little to steer investors away from the view that "near-term fundamentals remain weak." "While investors will enter the call with significant questions on Tesla's strategy, we believe many of these questions may be unanswered," Levy wrote. "And with significant uncertainty remaining on the investment thesis, it could lead investors to capitulate." TSLA YTD mountain Shares this year Another potential negative catalyst could stem from the company's Model 2. Although Levy views it as an "attractive opportunity to maximize scale," Tesla may delay the vehicle to focus on its robotaxi and full self-driving capabilities. "Yet for now we believe this strategy pivot is a clear net negative for the Tesla investment thesis, as it casts significant uncertainty on the path ahead for Tesla, making success of the stock dependent on bets with seemingly binary outcomes," the analyst wrote.