Tesla at risk of a ‘throwaway year’ without a new narrative from earnings

(Bloomberg / Esha Dey) — Tesla Inc. investors reeling from one of the stock’s worst-ever quarters are once again looking for Elon Musk to inject excitement back into the company when it reports results Tuesday, as profits slip and the much-awaited debut of a self-driving car remains months away.

This year is off to a dismal start as Musk’s political entanglements have pushed Tesla’s sales to a nearly three-year low in the first three months, leading a slew of Wall Street analysts to slash their growth expectations. The automaker’s souring outlook and towering valuation has spooked investors, leading to a 53% plunge in Tesla’s stock price since it hit a record in December.

“Musk needs to bring the voltage on this earnings call to get the stock out of stall speed,” said Dave Mazza, chief executive officer of Roundhill Investments, who owns the stock. “Tesla’s stock is stuck in an information air pocket as Elon Musk focused on his DOGE work, while their car sales skid and political headwinds build in important markets.”

Shoring up investor confidence will largely depend on whether Musk starts to step away from his involvement with the Trump administration and the Department of Government Efficiency. When reports this month suggested that such a move might be in the offing, shares of the company rallied, shrugging off weak sales number.

Beyond that, investors are looking for details on planned launch of the self-driving vehicle later this summer, and details on any new models at a time when competition from other electric vehicles is ramping up globally.

Tesla shares were up 2.1% by 9:33 a.m. in New York on Tuesday.

Earnings for the first quarter are expected to fall from the prior-year level and revenue is estimated to stay flat when the company reports results after markets close on Tuesday, according to data compiled by Bloomberg. Analysts have been dialing back their estimates sharply over the past month, with profit expectations falling by about 12% and revenue forecasts down over 6%.

“The takeaway for most will likely be that 2025 is a throwaway year,” said Gene Munster, co-founder at Deepwater Asset Management. However, Munster also expects this to be the year that “sets the stage for a major rebound in 2026 and beyond.”

Tesla shares have slumped this year with concerns swirling about the damage that Musk’s political activities have done to the company’s brand — and sales — adding to wider investor anxiety about economic growth and US trade policy. The 36% drop in the share price from January through March was the third-largest quarterly decline since the company’s 2010 public listing.

Despite the steep selloff, the stock continues to command a high valuation. Tesla shares trade at 78 times forward earnings, compared to the S&P 500 Index’s average of 19, as of Monday’s close. The mega-cap technology companies, often referred to as the Magnificent Seven, are widely seen as the company’s true peers rather than traditional carmakers such as General Motors Co. and Ford Motor Co., and they trade at a much lower average valuation of 23.

“Any report from Tesla matters less than what the future holds, since most of the value in the stock is based on the future,” said Eric Schiffer, chief executive officer of Los Angeles-based private equity firm Patriarch Organization. “Of all of the Mag-7 stocks, it is Tesla whose valuation is almost entirely about the future.”

Schiffer and other bullish Tesla investors point to the potential that Tesla’s self-driving technology will allow it to establish a dominant position over rivals such as Alphabet Inc.’s Waymo. The first real test of that promise will come in a few months when the company is slated to launch its robotaxi service in Austin in June.

Still, many investors and analysts remain worried about the slowing pace of the company’s core electric-car making business, which brought in 90% of its revenue last year. Apart from an overall slowdown in EV adoption, a production pause and the brand damage from Musk’s political involvement, the company’s stale product lineup is also hurting sales.

Many fans are awaiting the announcement of new, more affordable vehicles that could compete with lower-cost competitors like China’s BYD Co. On that front, there were discouraging news reports over the past weekend suggesting that Tesla is pushing back the production of its lower-cost Model Y by at least three months. The initial plan was to roll out the car in the first half of the year.

“Tesla faces questions on increasingly weaker fundamentals,” said Dan Levy, analyst at Barclays, noting that the company’s profit margin from the core auto business is expected to reach a new low, and after a soft start it may be increasingly difficult to see sales volume rising this year.

Still, Levy said, “a potential source of upside for Tesla stock could be a re-engaged Elon Musk,” adding that a “good narrative could outweigh weak fundamentals.”

Why Tesla Is Losing Ground Around the World: QuickTake

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Earnings Due Tuesday

• Earnings Premarket:
  • Verizon Communications (VZ)
• Earnings Postmarket:
  • Manhattan Associates Inc. (MANH US)
  • Pegasystems Inc. (PEGA US)

–With assistance from Subrat Patnaik.

(Adds current stock move in sixth paragraph.)

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