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'A moment of truth' for Tesla and Musk is here - Wedbush

Published 19/04/2024, 14:08
© Reuters.

Wedbush analysts said Tesla (NASDAQ:TSLA) and Elon Musk are facing “the moment of truth” next week, referring to the upcoming earnings conference call.

This call, according to Wedbush, might be “one of the most important moments in the company's history.”

“While we have seen much more tenuous times in the Tesla story going back to 2015, 2018, 2020..this time is clearly a bit different as for the first time many long time Tesla believers are giving up on the story and throwing in the white towel,” the team said.

This shift is largely due to a significant underestimation of demand erosion in China, which has severely impacted the bullish thesis for Tesla, they added.

Furthermore, internal debates regarding the focus on the Model 2 versus the development of Robotaxi, significant layoffs including crucial personnel, and an increasingly competitive global electric vehicle (EV) market have dramatically altered Tesla's narrative “from a Cinderella story to a horror show in the near-term,” said analysts.

As a result, all eyes will be on Tesla’s approaching Q1 earnings call, Wedbush stressed.

Both the investment firm’s analysts and the broader financial community are anticipating a challenging quarter, reflected in a tempered outlook. In response, analysts have adjusted their TSLA forecasts downward in anticipation.

To begin shifting the prevailing narrative around Tesla, Elon Musk will need to address five key issues during the conference call, as identified by Wedbush in order to bring back optimism in the company’s story.

“If Musk is flippant again and there is no adult in the room on this conference call with no answers then darker days are ahead,” the analysts wrote.

According to Wedbush, the five critical concerns Musk must address in the call include: 1) Strategies to reverse negative growth in China and pricing plans, 2) Provide clear 2024 goals and financial outlook, 3) Commit to launching Model 2 alongside robotaxis development, 4) Clarify AI initiatives and ownership concerns, and 5) Announce an AI day to outline strategy and monetization.

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