be warned

Texas-based EV giant foresees profit crunch amid price drops, slowing growth

Tesla warned that sales growth this year may be “notably lower” than the 2023 growth rate, as it works to launch a more affordable next-generation vehicle at a factory near Austin. Photo courtesy of Tesla

Shares of Tesla tumbled at the opening bell Thursday as the electric vehicle, solar panel and battery maker warned investors of slower sales growth this year after posting fourth-quarter results that were weaker than most had expected.

In a letter to shareholders released Wednesday, Tesla warned that sales growth this year may be “notably lower” than the 2023 growth rate, as it works to launch a more affordable next-generation vehicle at a factory near Austin.

Tesla, the letter said, is between two big growth waves, one from global expansion of the Models 3 and Y, and a second coming from the new vehicle.

The company, which is headed by billionaire Elon Musk, reported a fourth-quarter adjusted profit of 71 cents per share on revenue of $25.17 billion. Analysts polled by FactSet predicted a profit of 73 cents per share. Revenue was expected to be $25.64 billion.

Profits were off because Tesla lowered prices worldwide through the year in an effort to boost its sales and market share.

Shares slid more than 9 percent in Thursday morning trading.

Wedbush's Dan Ives said in a client note that Tesla's conference call on Wednesday to go over its financial results left many frustrated.

“Consistent with last quarter’s call, investors wanted to get their arms around the falling margins and constant, never ending price cuts seen globally, but instead, we heard from a much more cautious Musk who focused on production, next-gen vehicle timelines, and FSD/AI investments where much of the larger Tesla story was talked about instead of concrete guidance,” Ives wrote.

Still, the analyst remains optimistic on Tesla, believing that electric vehicle adoption to a broader mass market is near. However, Ives concedes there are still challenges to contend with.

“This is a pivotal period for Musk to get Tesla through that will help shape (or haunt) its EV future," he said.

Jeffrey Osborne of TD Cowen said that in the short term, it will be hard for EV competitors to catch up to Tesla as the company focuses on electrical efficiency and investing in battery technology. However, the analyst said there is “a great deal” of production-related risk in coming quarters that could possibly pressure margins and the stock as Tesla ramps up new plants in Germany and Texas and new vehicles.

A year ago, Tesla announced its plans to expand its Texas facility.

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A View From HETI

Nightpeak Energy's Bocanova Power project in Brazoria County has reached commercial operation. Photo courtesy Nightpeak Energy.

Oakland, California-based Nightpeak Energy announced earlier this month that its 150-megawatt battery storage project in Brazoria County, known as Bocanova Power, is now operating to address Houston’s peak capacity needs.

“This battery storage project will enhance grid reliability in the Alvin area while continuing to support integrating renewable energy,” Cary Perrin, president and CEO of the Northern Brazoria County Chamber of Commerce, said in a news release. “I believe we need energy storage now more than ever for its pivotal role in reducing strain on the grid while meeting fast-growing power demand in Texas and Brazoria County."

The project reached commercial operation in August, according to the release. The project utilizes Tesla's Megapack 2 XL battery storage system, and the facility operates under a long-term power purchase agreement with an undisclosed “investment-grade power purchaser.”

“Bocanova Power demonstrates the speed at which Nightpeak Energy is overcoming complex challenges to energize projects that support America's growing need for affordable, reliable, and secure energy,” Paris Hays, co-founder and CEO/CDO of Nightpeak Energy, added in the news release. “Unprecedented AI data center and manufacturing growth has only accelerated the need for these resources.”

Hays added in the release that the company has plans for more energy infrastructure projects in Texas and in the Western U.S.

Nightpeak Energy develops, owns and operates power plants that support the growing capacity needs of a decarbonized grid. It also owns and operates 240 MW of battery storage and natural gas generation facilities.

The company was founded in 2022 and backed by equity funding of up to $200 million from Dallas-based investment firm Energy Spectrum Capital.

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