Investors will question Tesla’s massive AI and autonomy spending as it reports earnings, seeking clarity on returns amid a divided Wall Street outlook.
NEW YORK: Questions about Tesla’s progress towards fully autonomous driving will dominate its upcoming earnings report. The electric vehicle giant plans to spend more than $20 billion on growth ventures like AI and robotics.
Analysts are set to scrutinise this massive capital expenditure plan. This comes amid a middling outlook for EV sales, despite a recent boost from increased car deliveries.
Elon Musk has said the investments are needed to enable an “era of abundance”. His statements have helped Tesla maintain a market capitalisation of around $1.5 trillion.
Morgan Stanley analysts noted Tesla was poised to pass 10 million miles driven on its Full Self-Driving (FSD) programme. They said this milestone reinforces Tesla’s autonomy lead.
“With capex doubling and free cash flow turning negative, investors will need clearer evidence that unsupervised autonomy is around the corner,” said the Morgan Stanley report. It also noted progress on the robotaxi rollout had slowed after its Austin launch.
CFRA Research analyst Garrett Nelson pointed to investor “heartburn” over the spending plans. He questioned if some ventures should be pared back due to economic uncertainty.
“What worries investors is the fact that the company hasn’t quantified the expected returns on these projects,” said Nelson. He added that more disclosure would reassure investors.
Analysts project Tesla will report modestly higher profits on a 10.8% rise in revenues to $21.4 billion. This compares to a year-ago period when sales were dented by criticism of Musk’s political work.
Tesla recently reported a 6.3% increase in first-quarter auto deliveries to 358,023. Wall Street remains deeply divided on the company’s valuation.
JPMorgan Chase views Tesla as significantly overvalued. An April note criticised its hefty capital budget and pointed to a larger inventory build than in any prior quarter.
Conversely, Wedbush analyst Dan Ives has set a share price target of $600. This represents an increase of more than 55% from Tuesday’s level.
Ives expects the conference call to yield more clarity on AI and autonomous driving ventures. He believes debate over how quickly the AI era will take shape has left the market at a crossroads.
Growth in FSD will “change the financial model and margins for Tesla looking ahead,” Ives said.
