Tesla Q4 Financial Results and Prospects: Vehicle Delivery Goals, Profitability Questions, and Elon Musk's Compensation

Tesla, the EV pioneer, has witnessed turbulent times in the stock market in 2024, with its shares experiencing a downturn despite the overall market reaching new peaks. Investors are pinning their hopes on Tesla's Q4 earnings report, due this Wednesday, for some respite.

The company has faced some negative press, including the Hertz rental car company offloading numerous EVs, Tesla's price reductions in China, a fortnight's production pause in Berlin, and CEO Elon Musk's poorly timed appeal for more stock. Since the beginning of the year, Tesla's stocks have fallen by more than 15%, while the S&P 500 has risen by about 2%.

Tesla is predicted to report a Q4 revenue of $25.87 billion, a 6.4% increase from the previous year, according to Bloomberg's forecasts. Meanwhile, Wall Street expects an EPS adjustment of $0.73 that translates into an adjusted net income of $2.61 billion, a 36.4% drop compared to last year. The falling profitability is a result of the strain on margins following Tesla's cost-cutting measures initiated in late 2022. In the last quarter, Tesla reported a gross margin of 17.9% and an operating margin of 7.6%, both in decline sequentially and year-over-year.

In Q4, Tesla reported a record-high 484,507 deliveries, surpassing Bloomberg's estimated 483,173. This figure is nearly 20,000 units more than Tesla's prior record number of 466,000 units delivered in Q2. Tesla claims a year-over-year growth of 38% in vehicle deliveries to 1.81 million and a 35% increase in production to 1.85 million for the year. Despite the growth rate being lower than the company's 50% target, disruptions due to factory shutdowns and improvements in Q3 meant the goal was not achievable.

Investors will be keenly interested in Tesla's new vehicle delivery aim for 2024. A surge of 50% in this year would equate to 2.715 million units, but industry expectations, according to Visible Alpha, place the goal at 2.19 million units, up by 21% from 2023.

Furthermore, the Cybertruck delivery details are yet to be released, arousing curiosity. Analysts will be querying the delivery total and production ramp-up during the earnings call.

It remains to be seen how Tesla intends to boost sales at a global level with dwindling popularity of EVs, including markets like China. Price reductions in China, EV tax credits at the point of sale in the US, and the updated Model 3 now up for sale globally could potentially elevate Tesla's sales.

However, there are drawbacks such as diminishing margins due to price cuts and the elimination of EV tax credits for certain Tesla models in the U.S.

There are also concerns around excess capacity in China, fleet companies like Hertz reducing EVs, and depreciating residual values for EVs. Amid these challenges, Tesla plans to commence production of a mass-market EV named "Redwood" in mid-2025.

One potential hot topic during the earnings call might be Musk's recent remarks about needing increased control of Tesla to realize its far-reaching AI goals. His statement, along with a potential new stock-based compensation plan, has caused a stir, inviting a lawsuit over his previous pay package.

Analysts will be seeking clarification on Musk's comments, given the long-term significance Tesla’s AI initiatives and the appearance that Musk doesn’t have Tesla’s best interests in mind, potentially causing a significant setback in Tesla's growth trajectory.