It’s almost time for Tesla (NASDAQ:TSLA) to announce its Q1 results, and as per usual, we already know one part of the puzzle – the quarter’s delivery numbers.
Claim 55% Off TipRanks
Trade TSLA with leverageThose, as has been the case quite often in recent quarters, were underwhelming and fell short of Street estimates. But with that now out of the way, can the Elon Musk-led company surprise by dialing in a better-than-expected print?
Au contraire, says Jefferies analyst Philippe Houchois, who thinks the Q1 results will show “further widening of the gap between vision and execution.” Unless there is a convincing announcement on robotaxi roll-out, Houchois thinks the results could intensify concerns around funding and “raise the logic of an eventual merger with SpaceX.”
Houchois thinks ambitions to roll out a Robotaxi service across 25–50% of potential US markets by the end of the year are unlikely to be achieved, with both regulatory approvals and technology readiness (including lidar-less FSD capabilities) “remaining drags.” That said, Tesla’s vertically integrated structure and its capacity to secure funding and scale industrial production remain “unique strengths,” particularly compared to competitors that are also progressing slowly and contending with higher capital costs.
As for humanoids, growth prospects appear “even more distant,” while the competitive landscape is already crowded. Nevertheless, Houchois thinks Tesla might have an edge due to the ability to deploy humanoids internally and its “experience scaling supply chains.”
As for the raw results, Houchois expects Q1 revenue of $21.2 billion, up 10% year-over-year but 15% below Q4, based on unit sales of 358,000, which include a relatively weak end to the discontinued S and X models. The analyst forecasts a core auto gross margin of 15.5% (down from 17.2% in Q4), including a 2-percentage point D&A (depreciation and amortisation) headwind from lower volume vs. Q4.
Factoring in tighter operating expenses, Houchois arrives at an operating margin just under 3% (around $609 million), with EPS of $0.14 on a GAAP basis and $0.27 non-GAAP. With production exceeding deliveries by roughly 50,000 units (a ~$1.5 billion impact), alongside Cybercab pre-production activity and a “slow start” to the $20 billion annual capex program (with $3.6 billion deployed), the analyst anticipates cash burn of approximately $1.9 billion.
“As funding needs grow and projects converge, from Semi/Fab investment to Grok/Starlink in cars and X as We-Chat style platform, the logic of merging Tesla and SpaceX will keep center stage,” Houchois summed up. “Traditional valuation metrics are of little use, with shares driven by sentiment and faith in operating roll-outs and sustained innovation.”
All told, Houchois assigns Tesla shares a Hold (i.e., Neutral) rating, although to account for “higher mid-term growth,” he raised his price target from $300 to $350. However, the new figure still sits 10% below the current share price. (To watch Houchois’ track record, click here)
While the broader Street is a bit more constructive on valuation, conviction remains lukewarm. The average price target stands at $413.89, pointing to about 6.5% upside. Yet, with 13 Buys, 11 Holds, and 6 Sells, the overall consensus continues to land firmly at Hold. (See TSLA stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.