Tesla (TSLA) Q4 FY24 Earnings Review: Valuation Is For Losers (No Paywall)

Tesla (TSLA) Q4 FY24 Earnings Review: Valuation Is For Losers (No Paywall)

By Yimin Xu. The First Buddy Gets A Pardon.

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Hi Cestrian friends,

It’s not everyday when you join an earnings call and the CEO opens the conversation by claiming they will be the most valuable company in the world by far. But no one would want to really best against it when it comes from the richest man in the world and the First Buddy.


“I see a path, I'm not saying it's an easy path, but I see a path for Tesla being the most valuable company in the world by far, not even close. Like, maybe several times more than, I mean, there is a path where Tesla is worth more than the next top five companies combined...
…and that is overwhelmingly due to autonomous vehicles and autonomous humanoid robots…
We'll continue to lay the ground work for that in 2025… setting up for what I think will be an epic 2026 and a ridiculous ‘27 and ‘28. Ridiculously good. That is my prediction.”
Elon Musk, Q4 2024 Earnings Call

In poker, a bluff is when someone signals they hold a very strong hand when the opposite is true. The intention is to get other players to fold, instead of call. But there is also the semi-bluff, when a player’s hand is not very good right now if shown down, but may improve to the nuts (the best hand possible) if the right turn and river (the final two community cards) come along. The intention is to either win the pot straight away - if no one calls their BS - or win by the final showdown anyway.

This is the exact situation we are in with Tesla.

An opening statement like the one above suggests weakness in the existing hand. However, there is also a distinct possibility Tesla really does conquer the world through autonomous vehicles and autonomous humanoid robots, both of which are trillion dollar markets.

Leveraging Peter Thiel’s famous quote - “Competition Is For Losers” describing a company best positioned as a monopoly - I think here the perfect description is “Valuation Is For Losers”.

If a company needs to show strong fundamentals, consistent revenue and earnings growth, and a fair valuation to attract investors, it is probably already a loser. Real winners, like Tesla, don’t need all that. They have the most valuable assets in the world - a visionary CEO that can mobilise an extremely loyal following plus the insider access to the White House. And let’s be honest, when have you met someone who is very passionate about Sundar Pichai?

I hope you can sense my half joke - if you were about to jump up and debate me, that was exactly my point.

Now let's dive into the earnings.

By Yimin Xu, January 31, 2025


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1. Growth Highlights

Quarterly Revenue

Tesla’s Q4 revenue grew 2% YoY to $25.7 billion. Not extremely remarkable by any stretch of the imagination.

Trailing-Twelve-Month (TTM) Revenue

This puts Tesla’s TTM Revenue at $97.7 billion, 1% higher than the previous year.

Tesla Business Segments

Tesla, surprisingly, is still a car company, with 77% of revenue attributed to automotive, majority of which are sales. Automotive revenue includes sales, regulatory credits, and automotive leasing. As a whole, it declined 8% YoY.

However, Energy generation and storage revenue has expanded its share from 9% to 12% in Q4. This is a rapidly growing business segment that draws a lot of investor interests.

Business Segment Performance ($m, YoY % growth)

Automotive sales declined by 10% in Q4, to $18.7 billion. The decline was due to lower average selling prices (ASP) of Model 3, Model Y, S, and X, which were reduced to maintain affordability and demand. However, deliveries actually increased by 2% YoY, partially offsetting the revenue drop.

Model Y remained the best-selling vehicle globally. While Cybertruck ramped production, but it is still in the very early stages of scaling. Tesla is transitioning to the new Model Y in Q1 2025, which is cause temporary production disruptions. At the same time, a more affordable Tesla model is still on track for the first half of 2025.

Energy generation and storage revenue increased by an impressive 113% to $3 billion, putting the full year score at $10.1 billion, a 67% YoY. Tesla expects at least 50% growth in energy storage deployments in 2025.

The Shanghai Megafactory construction is now complete and is expected ramp up the production of Megapack, an ultra-large commercial energy storage battery, in 2025. Megapack is a ultra-large commercial battery that provides energy storage to stabilise the grid and prevent outages. Powerwall, the other Tesla battery, is a compact home battery that stores energy generated by solar or from the grid.

Services and other revenue rose by 31% in Q4 to $2.8 billion, driven by higher Supercharger utilisation, Tesla’s expanding insurance business, and aftermarket vehicle sales and repairs.

Capacity By Location and Model

Tesla’s capacity across all regions remain unchanged from Q3.

Here is a summary of the YoY changes of all of the key metrics for Tesla.

2. Profitability Margins

Tesla’s profit margins declined versus a year ago across the board. Gross margin retreated from 17.6% a year ago or 19.8% in Q3 to 16.3%. The decline in gross margin was driven by lower vehicle ASPs (average-selling-price), although it was partially mitigated by lower raw material costs and cost efficiencies.

The operating margin dropped by 2% from a year ago, although flat vs. Q3. This was largely driven by higher R&D costs related to the upcoming Robotaxi (Cybercab).

These low margins are symptomatic of hardware companies facing high material and input costs, which is why Musk continuously looks forward to the Robotaxi era, when Tesla could potentially get a 15-30% cut of taxi platform fees at very little incremental cost.

CapEX

Capital Expenditure came in at $2.8 billion, nearly 2% of revenue higher than 2023, but not exceptionally high compared with Q1 or Q3.

Most of CapEx is in AI compute infrastructure, alongside factory expansions for vehicle manufacturing and energy storage production capacity.

TTM Earnings Per Share

Earnings per share on a TTM basis is poor, although some of the decline was due to an anomalously high Q4 2023 EPS from tax rebate.

3. FSD, Robotaxi (Cybercab) and Humanoid Robot

Currently, thousands of Tesla vehicles already operate autonomously within factories in Fremont and Texas (watch this video).

The Q4 Vehicle Safety Report shows that FSD vehicles are significantly safer than human-driven ones.

On the earnings call, Elon Musk confirmed that Tesla will launch unsupervised FSD in Austin by June 2025.

What’s really exciting about Robotaxi from a consumer point of view is an enormous increase of utilisation for the vehicles we own. Normally, if we commute to work, we may spend 2-3 hours per day, or 10-15 hours per week driving the car, plus a few hours on the weekend. But when we are at work, the car is mostly idle. Robotaxi can increase the utilisation rate to 50-55 hours per week while making an income for the owner. Musk confirmed that individual Tesla owners will likely be able to list their cars on Tesla’s Robotaxi network in 2026.

Separately, Tesla plans to build several thousand Optimus robots in 2025 and deliver them to customers within the year. While a small number initially, Musks believes “it doesn't take very many years before we're making 100 million of these things a year.” The cost goal is to keep it below $20,000. Moreover, Musks remarked on the call that that “Optimus has the potential to be north of $10 trillion in revenue.

Placing carrots both near and far seems to be the perfect strategy to keep investors excited and forgiving.

4. Valuation (Must Read)

If Tesla remains the company as it is now in the foreseeable future, the current valuation is indefensible. This is whether paying 13x TTM Revenue for 1% TTM growth or 132 NTM P/E for 25% forward EPS growth.

The valuation of Tesla rests entirely on the future promise of dominating the Robotaxi industry, which is estimated to be worth $4 trillion by ARK’s Cathie Wood by 2030. Let’s say Tesla gets half of the market ($2 trillion per year) as the first mover, and we have a 6x EV/ Revenue multiple (half of today’s valuation), Tesla is still a 12 trillion company by 2030, a cheeky 10x from here.

Another way to look at Tesla’s stock is prisoner’s dilemma. If Tesla does actually become the world’s most valuable company, investors will fear missing out on the incoming rally. As a result, they “buy the rumour” and try to front run the move, creating more FOMO on the way. If everybody says, let’s wait for Tesla to prove it first, then we will just be trading a car company.

But what’s the fun in that?

5. Technical Analysis

TSLA Hourly (https://www.tradingview.com/x/NTCjc2rd/)

On the hourly chart, TSLA’s latest correction does not appear done yet. This is because the beginning of January rally consists of just 3 waves, a very standard wave-B corrective behaviour.

To me in the short term, the pressure remains downwards, with a potential target below $335.

TSLA Daily (https://www.tradingview.com/x/uki4S6Q7/)

However, the medium term picture looks much rosier. Once the correction completes, TSLA can potentially head above $600. $600-$778 (a wide range but such is the nature of Teslas’s moves) is the larger degree wave (3) target.

That puts Elon at least two-thirds way to becoming a trillionaire.

TSLA vs US10Y Yield

Another important factor to consider is the relationship between Tesla and bond yields. Tesla tends to move in the opposite direction of the 10-year US Treasury yield.

Why? A rise in the risk-free yield signals tighter financial conditions, putting pressure on excess liquidity that flows into high-risk assets. The opportunity for taking risks and investing in low-yielding assets becomes higher. Moreover, it increases the discount rate for future free cashflows, meaning Tesla’s future FCFs are worth less today.

The move since November has been anomalous. Tesla shot up as well as the 10-year yield, on the back of Trump’s win. This is because the 10-year yield is projecting higher inflation under Trump’s tariffs, while Tesla is projecting faster growth under easier FSD regulation as Musk becomes the First Buddy.

It’s not clear if or when the old inverse relationship will return. However, it is a key relationship we must monitor. If the 10-year yield does recede as Trump’s tariffs are less restrictive than expected, that is a bullish tailwind for Tesla, despite its sky-high valuations. And vice versa.

6. Rating: Equal Weight

My rating for Tesla remains unchanged, even as the price technicals point to further upside in the medium term. This is because I cannot say Tesla is “Overweight” based on its current fundamentals. But it does not deter us from trading the stock, knowing the price drivers involved.

The Macro Perspective
We’re delighted to host Yimin Xu’s premium service, YX Insights. Welcome to YX Insights! YX Insights brings you ++actionable investing and trading ideas++ in: * Macro Instruments – including TLT, Fed Funds, Gold, Silver, USO * Crypto – including BTC, ETH, SOL, COIN and Crypto miners * Large-cap Equities & Private Credit – Magnificent 7, Financials, Consumer,