Elon Musk-backed Electric Car Manufacturer Tesla Inc. witnessed a remarkable surge in premarket trading on Wednesday, with its stocks climbing by as much as 11.7%. This surge followed the release of the company’s first-quarter earnings report, which prompted Bank of America to upgrade its rating on Tesla shares to “Buy”.
Financial Highlights
Despite the positive market response, Tesla’s financial report for the first quarter revealed a decline in revenue from USD 23.33 billion to USD 21.30 billion compared to the previous year. The company also saw a significant decline in net income, which fell 55% to USD 1.13 billion.
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Key Points from the Earnings Call
Investors focused on the updates given during Tesla’s earnings call. CEO Elon Musk announced a possible advancement in the timeline for the production of new, more affordable electric vehicle models. Originally scheduled for late 2025, production may now begin in late 2024 or early 2025.
On the other hand, Musk outlined the progress on AI capabilities at Tesla and revealed that he is working on a deal with a titan automaker to hand over its Full Self-Driving (FSD) technology. However, Tesla kept a conservative tone, although the overall progress seen so far is quite optimistic, with volume growth rates expected to decline compared to 2023.
Challenges and Market Trends
Tesla’s stock had experienced a downward trend earlier in the year, dropping by over 40%. Concerns over declining deliveries, increasing competition, particularly in China, and ongoing price reductions were among the factors contributing to this decline. Notably, the company reported an 8.5% decrease in vehicle deliveries earlier in the quarter.
However, Tesla’s share price had a bad start to the year, even falling by 40%. Unsatisfactory delivery amount was another reason, competition especially in China was also felt and price cutting continued. Additionally, at the beginning of the quarter, the carmaker reported an 8.5% decline in vehicle deliveries compared to the same period last year.
Analyst Upgrade and Future Outlook
Following the release of Tesla’s Q1 earnings report and subsequent earnings call, Bank of America analysts upgraded the stock’s rating from Neutral to Buy. He cited the resolution of key concerns and the revived growth narrative as reasons for the upgrade.
