On Wednesday, JPMorgan maintained its Underweight rating and $115.00 price target for Tesla Inc. (NASDAQ:TSLA) stock, following the company's first-quarter earnings which showed weaker-than-expected results. The firm highlighted the risk of further negative earnings revisions and continued valuation multiple compression for the electric vehicle manufacturer.
Tesla's first-quarter revenue reached $21.3 billion, which was nearly in line with JPMorgan's estimate of $21.4 billion but fell short of the Bloomberg consensus of $22.3 billion. This consensus figure had already been adjusted downward from $25.7 billion subsequent to fourth-quarter results from 2023, reflecting a clearer trend in vehicle deliveries and pricing.
The company's EBIT (earnings before interest and taxes) for the first quarter was reported at $1,578 million. This figure missed the consensus estimate of $1,734 million, which itself had been reduced from $2,320 million following the results of the previous quarter.
Most concerning for JPMorgan was Tesla's free cash flow in the first quarter, which showed a deficit of $2,531 million compared to JPMorgan's estimate of a $1,306 million shortfall and the company-compiled consensus for a $406 million deficit. This negative cash flow was attributed to a record increase in unsold vehicles, as Tesla produced approximately 47,000 more vehicles than it sold during the quarter despite price reductions aimed at boosting demand.
This situation arises amidst growing competition and a slower-than-anticipated industry-wide shift from internal combustion engines to battery-powered vehicles.
InvestingPro Insights
As Tesla navigates through its current financial landscape, certain metrics from InvestingPro shed light on the company's valuation and performance. Tesla holds a market capitalization of $461.4 billion and is trading at a P/E ratio of 36.99, suggesting a premium valuation in the market. Despite concerns over its earnings and cash flow, Tesla's balance sheet reflects a positive aspect with more cash than debt, which is a reassuring sign for investors considering the company's financial resilience.
InvestingPro Tips indicate that Tesla is a prominent player in the Automobiles industry, yet it is trading at a high earnings multiple relative to near-term earnings growth. With 21 analysts having revised their earnings downwards for the upcoming period, it's clear that the market is recalibrating expectations. For investors looking for deeper insights, InvestingPro offers additional tips on Tesla, and by using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a total of 22 InvestingPro Tips for Tesla.
Moreover, Tesla's stock performance has been under pressure, trading near its 52-week low and having taken significant hits over the last six months. This aligns with JPMorgan's cautious stance on the company. However, it's worth noting that the stock has provided a strong return over the last decade, and analysts predict the company will remain profitable this year. These insights could prove invaluable for investors as they weigh the potential risks and opportunities in Tesla's stock.
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