Tesla Earnings: A Closer Look At Estimates

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Tesla (TSLA - Free Report) helps headline a stacked earnings schedule this week, reflecting the first of the Mag 7 reports we’ll get. The stock has delivered underperformance relative to the S&P 500 YTD so far, down roughly 13% while also facing some pressure following its latest quarterly release near the end of January.

A Closer Look at Estimates

Both EPS and sales revisions for Tesla have shown a level of bearishness over recent months, as shown below. While revised lower, the estimates do still reflect solid forecasted growth, with earnings forecasted to climb 33% from the same period last year on 14% higher sales.

Image Source: Zacks Investment Research

Regarding its EV business, delivery numbers came in a bit soft at 358k, below expectations. Investors have already had time to digest the results, with guidance concerning its EV outlook now a much more important piece of the puzzle.

And while the EV business is what Tesla is best known for, the stock has largely been trading on the back of its AI ventures, with the company investing heavily in large-scale AI compute infrastructure.  

As we’ve seen over recent years, the profitability picture for the giant will again be a critical driver of sentiment, with its gross margin steadily declining over recent years amid falling prices for its EVs. Please note that the chart below tracks margins on a trailing twelve-month basis.

Image Source: Zacks Investment Research

Bottom Line

While Tesla shares remain in the red YTD, the stock has bounced back nicely over the past several weeks, helping erase a nice chunk of the negativity. The company helps headline the reporting docket this week, with EPS and sales revisions both falling over recent months.

Still, solid growth is expected for the Mag 7 member, with margins and commentary on spending levels geared toward its AI ventures remaining key to its near-term momentum. Like many, the company is spending heavily on its future, with current valuation multiples reflective of sentiment that the investments pay off.