Tesla Inc (TSLA)

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Bear of the Day: Tesla (TSLA)
By: Zacks Investment Research | April 16, 2024

Adding concern that there may be more downside risk in Tesla’s (TSLA) stock, the innovative automaker announced on Monday that it will be cutting 10% of its workforce as it grapples with a slowdown in EV demand.

More unnerving, is that two key deputies are heading for the door voluntarily and unassociated with the layoffs in Drew Baglino who was the company’s top engineering executive and Senior Vice President along with Rohan Patel who was vice president of pubic policy and buisness development.

Unfortunately, investors who are getting that feeling that TSLA could drop even further this year are not alone as Tesla’s stock lands a Zacks Rank #5 (Strong Sell) and the Bear of the Day.


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Declining Earnings Estimates: While there is much speculation and concern as to what caused Baglino and Patel's exit, most concerning is that earnings estimate revisions have continued to decline in the last week despite Tesla’s total sales being forecasted to rise 8% this year and projected to expand another 16% in fiscal 2025 to $120.31 billion.

Still, Tesla’s top line is expanding at a much slower rate than in the past and FY24 EPS estimates have now dropped -33% over the last quarter from projections of $3.83 per share to $2.54 a share. Plus, FY25 EPS estimates have fallen -35% in the last 90 days from expectations of $5.34 per share to $3.47 a share.


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Unfavorable Zacks ESP: More alarming is that the Zacks ESP (Expected Surprise Indication) indicates Tesla could miss its first quarter earnings expectations next Tuesday, April 23. To that point, the Most Accurate Estimate has Tesla’s Q1 EPS slated at $0.44 and -7% below the Zacks Consensus of $0.47 a share.


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This comes as Tesla has been short of both top and bottom line expectations in its last two quarterly reports, most recently missing Q4 EPS estimates by -5% in January.

Zacks Investment Research
Image Source: Zacks Investment Research

Valuation Concerns: Lastly, Tesla’s stock will not be immune to valuation concerns which may start to mount as the company’s slower growth is leaving TSLA at stretched premiums in terms of price-to-earnings and price-to-sales; without the very lofty expansion trajectories that have offered support.


Image Source: Zacks Investment Research

Takeaway

At the moment, Tesla’s stock has an overall “F” VGM Zacks Style Scores grade for the combination of Value, Growth, and Momentum. Furthermore, it looks unlikely that the EV pioneer will be able to offer the upbeat guidance that can cause the market to look the other way if the company does indeed fall short of quarterly expectations again.

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