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Wedbush Warns Investors Ahead of Tesla Earnings

Tesla Earnings.

Since Elon Musk announced that Tesla (NASDAQ: TSLA) would unveil its Robotaxi vehicle on the 8th of August, many analysts frowned at the idea, including Wedbush’s senior equity research analyst, Dan Ives. This doesn’t mean that Ives is going bearish on Tesla; he’s still bullish, but he believes that the company should get an affordable car out there first, before it even starts thinking about Robotaxis. Here is what he had to say about the upcoming Q1 Tesla earnings.

Dan Ives’ Comments

Dan Ives said that Tesla trading the affordable Model 2 for Robotaxis would be a “tragic gamble” that would define the future of the company in the next 3 to 5 years, adding that while he’s bullish on the company’s quest for autonomy and Robotaxis, they’re not for another 5 or 6 years. In fact, he said that Tesla promoting Robotaxis and full self-driving right now would be like Apple (NASDAQ: AAPL) saying that it won’t release anything new until the iPhone 21, while asking shareholders to keep trusting the company at the same time.

Ives also said that he wants Elon Musk and Tesla’s management team to discuss a few things on the Tesla earnings call, including how the company plans on turning things around in China and Musk’s upcoming compensation package. He also added that Tesla needs to give guidance on growth, margins, and how it plans to grow and develop its AI technologies.

No one has a crystal ball, so no one really knows what management is going to be talking about in the call, but what’s certain is that it’s going to be a very important call, so much so that Musk had to delay his visit to India, where the newest Tesla factory will be built, to attend the Tesla earnings call and answer investors’ questions.

Tesla’s FSD Bet

Recently, it was announced that Tesla has dropped the price of FSD to $8,000 from $12,000 in the United States, getting rid of Enhanced Autopilot at the same time, which was $6,000, and this should be extremely bullish news for Tesla investors. This is because Tesla owners really loved FSD when they tried it in the free trial period, and Tesla even reduced the monthly FSD subscription to $99 from $199.

Discounts to FSD will allow more Tesla owners to come on board, as many of them thought it was too expensive. In fact, only around 400,000 Tesla owners in the U.S. are FSD subscribers, when the car company has around 2.5 million Tesla vehicles on U.S. roads. The discounts could also help Tesla sell more cars as non-Tesla owners might want to see what the hype is about.

Musk said when the company reported 2023’s Q4 earnings that 2024 won’t be a great year for Tesla thanks to a slowdown in the EV industry, so we already know that the Q1 Tesla earnings won’t be great. However, we know that Tesla plans to go all in on autonomy, and this FSD discount proves that. It’s very likely that Musk and management will talk a lot about FSD in the Tesla earnings call, and how they expect to increase FSD adoption rate.

They’ll also talk about the newest updates to the software, including FSD version 12.4, which Elon called a “big release” and said that it should arguably be called version 13.

Musk saying that FSD Version 12.4 should be called Version 13.

FSD in China?

During the Tesla earnings call, the management team might also go over the concerns for the Chinese market, and discuss things like when FSD will come to China. Musk said on X that he expects FSD to launch in China very soon, and this was followed by Tesla announcing a new $2,000 price cut to its Model 3 EV in China, which could help increase demand in the country.

Musk saying that FSD might arrive in China soon .

Still, it might take a while before Tesla can get FSD to China, as FSD works by gathering data, and the Chinese government might not want a company based in the United States to keep collecting Chinese data.

Will Robotaxis Really Need 6 Years?

Ives said that Robotaxis needs another five or six years, but given the fact that the reveal is happening in August, we might see Robotaxis launching way sooner than we think. Musk has made it clear that this is what Tesla is prioritizing right now, and since the company has already made so much progress with FSD, it’s not hard to believe that it’ll successfully solve autonomy soon, maybe by the end of this year or next year.

Ives also mentioned the tough competition in the market, and while he’s correct in saying that many other companies are coming out with great EVs, competition in autonomy is basically nonexistent. The thing is, Wall Street analysts want fast results, but Tesla is currently in a new growth phase, so it’s only natural that it runs into headwinds at first. Therefore, Tesla investors who really believe in the company and the future of fully autonomous vehicles, then you need to hold the stock and weather the upcoming storm.

Of course, analysts’ opinions aren’t always right, and while some of them don’t really believe in Robotaxis, others think Robotaxis are essential for Tesla’s long-term value. For example, Matt Smith, who’s an equity analyst at Rebellionaire, recently said on X that he thinks that 80% or more of people, including Tesla investors, don’t actually understand the economics and strategy of Robotaxis.

Matt Smith and James Douma on the value of Robotaxis.

He received a reply from James Douma, a leading machine learning expert and Tesla investor, who thinks that it’s actually 99% of people in the Tesla community that don’t understand how Robotaxis would benefit Tesla. Douma has previously tweeted that Tesla’s robotaxis would be better than affordable vehicles for the company, saying that one robotaxi will drive 5x the miles of a personal Tesla car, which would, in turn, 5x the value to users and the profit to investors.

James Douma on the value of Robotaxis.

The CEO of Ark Invest, Cathie Wood, is also extremely bullish on Tesla thanks to Robotaxis. She believes a Tesla Robotaxi network is a $10 trillion opportunity, which is why she put a price target of $2,000 on the company’s stock, believing that it’ll get there by 2029. This price would give Tesla a market cap of $5 trillion, and Musk believes that it’s entirely possible for the company to reach that goal. He even liked tweets with Cathie’s bullish price target, and even said that he sees Tesla reaching that market cap soon.

As for concerns over affordable cars, Tesla’s price cuts are making its luxurious vehicles more affordable than ever. In fact, Musk posted on X that the Model Y now starts at $29,490 after discounts, U.S. federal tax credit, and estimated gas savings, which isn’t too far from the $25,000 we thought the affordable EV would cost.

Musk on the Discounted Model Y.

TSLA Stock Forecast

Even though TSLA stock is down now, we’re still getting great news when it comes to the company’s new technologies and expansions, and Dan Ives even said that entering the Indian market is a huge opportunity for Tesla, forecasting that 15% of the company’s sales in the future will come from the country. He also said that Musk needs to stay as the company’s CEO for the next five to seven years, which really tells you how significant the upcoming Tesla earnings call is, and it could be Musk’s most important one to date, because he needs to show how he’ll turn things around.

For investors who really believe in Tesla and Musk, it might be a good idea to load up on more shares if the earnings are bad and the stock starts falling. Remember, you’re not just investing in Tesla’s EVs when you buy Tesla shares, but also Tesla’s AI, energy business, car insurance business, and robotics business.


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