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When Tesla, Inc (TSLA) reported its first quarter (Q1) 2025 results on the 22nd of April, the company’s top and bottom lines both missed aggregate LSEG expectations, with reported revenue of $19.34 billion versus expectations of $21.11 billion and earnings per share of $0.27 cents (adjusted) versus expectations of $0.39.
However, market reactions were decidedly different. If the S&P 500 (SPX) was to be considered as a proxy for broad market sentiment, then the conviction in Tesla’s stock can be summarized thus: in the week leading up to the earnings, broad market volumes mostly trumped that in Tesla. On the day before the earnings release and subsequently till the end of the week (on the 25th), this almost completely reversed.
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
Source: Leverage Shares analysis
Friday (i.e. the 25th) was the biggest day in terms of post-earnings stock value and volume performance: price and traded volume were about 20% and 38% higher than on the day of the earnings release.
Trend AnalysisAt first blush, there is certainly nothing in balance sheet trends to justify such a massive sentiment uptick:
Source: Company Information; Leverage Shares analysis
If current early trends continue, revenue is slated to close the current Fiscal Year (FY) 20% lower than the previous year, which itself was largely flat in terms of revenue growth. While cost of revenue is also trended to close lower at a similar rate, operating expenses is slated to close 8% higher.
Operating expenses is led by growing research and development (R&D) expenses, which is a consistent feature in this company – and likely a highly valued trend, given its success in essentially creating a market in the form of market-viable Battery Electric Vehicles (BEVs). Selling, General and Administrative (SG&A) expenses are relatively tightly controlled.
Net income is under deep stress. In 2024, net income was halved relative to the previous FY. If trends continue on Q1 2025 net income of $409 million, the year’s income will close out at a fourth of the previous year. A large factor behind this is ongoing expenditure in the buildout of AI infrastructure, which is currently valued at $5.4 billion. Over the past three months relative to end of the previous FY, the total value of plants, property and equipment grew by 4.5%, with AI infrastructure being among the top-growing segments at 5.2% and tooling related to the manufacturing of existing products as well as AI-related assets growing by 14%. Overall construction in progress grew by 7.8% in the same period to $7.3 billion and likely includes additional facilities for AI and AI-related activities.
Over in the world of BEVs, none of Tesla’s products can be considered as “budget” market products in the larger automobiles market. Its cheapest model in the U.S./Western Hemisphere retails at around $44,000-$55,000 while the mostly-related Model Y retails at around $35,000-$45,000 range in China. Regardless of hype around the “high-ticket” Model S or the Cybertruck, the vast bulk of the company’s production and sales have and continue to be driven by its “cheaper” models.
Source: Company Information; Leverage Shares analysis
Between the “cheaper” and other “high-ticket” models, Tesla has maintained a roughly 19:1 production/delivery schedule since 2022. While there are momentary bumps in deliveries of “other models” with new launches (like the Cybertruck), this ratio has remained resilient. In Q1 2025, there are signs of decline in “other model” deliveries, which is currently trending to close the year at a 40% downturn relative to last FY. Deliveries of the “cheaper” Model 3/Y, meanwhile, are trending to close the year with a 24% decline.
The “cheaper” segments have featured near-constant facelifts and upgrades over the year. The latest highly-vaunted (and relatively well-reviewed) model is the Tesla Model Y “Juniper”1 in China/Asia earlier in the year, which some reviewers have described as a “Tesla Model Y with a Cybertruck face”.
Source: CarSauce
Nonetheless, overall deliveries are clearly showing early signs of decline. The slight misalignment between production and deliveries indicate that factory activities might be turned down going forward: inventory trends indicate a surplus of stock relative to delivery trends.
Source: Company Information; Leverage Shares analysis
If deliveries slow down, then production capacities will move towards consuming materials and goods currently in inventory rather than continuing to add to inventories.
What’s the Hype?As per reports2 released by the U.S. National Highway Traffic Safety Administration, Tesla is one of the most vertically-integrated manufacturers within North America, with somewhere between 65-75% of all U.S.-sold models’ parts (by value) manufactured in the U.S. – with the balance manufactured mostly in Mexico. The batteries, on the other hand, is a mixed bag with many packs originating in some form from China. This is already on the verge of being addressed to some extent by the upcoming Lithium Refinery plant in Robstown (Texas, U.S.A) – which aims to refine enough lithium for the battery content of a million vehicles3 when fully operationalized. The plant is expected to go live sometime this year.
In contrast, Detroit’s “Big Three” are more reliant4 on plants outside of the U.S. (albeit in North America) to service the U.S. market. As the article about President Trump’s tariff war5 penned earlier in the month outlined, this is likely to be an arduous multi-year campaign and almost certain to kickstart a recession. In its current lineup, Tesla is largely secure. On upcoming projects such as Tesla Semi and Cybercab, however, it is estimated that the company originally had heightened exposure to China6, which the company is scrambling to address and reorient.
The integration patterns were likely the first trigger towards heightened buying activity into the stock despite poor revenue and net income trends. Even if the pie representing auto sales shrinks due to recessionary drawdowns, Tesla is likely to be the least affected among all carmakers.
The second trigger was likely assertions made7 by the CEO Elon Musk about the state of Tesla’s Full Self Driving (“FSD”). Mr. Musk stated that “FSD Supervised” – wherein operator supervision is constantly required – was launched in China with positive reception and without the utilization of country-specific maps, thus representing a high water mark in technical feasibility. “FSD Supervised” is expected to be launched in Europe later this year while Model 3’s, Model Y’s, and Cybertrucks are being run on “FSD Supervised” from the production line to outbound logistics lots at Fremont and Texas plants to rack up training data. The company estimates that FSD has been used in North America and China for 7.7 million miles per day. On a related note, the company is on track for Robotaxi’s pilot launch in Austin (Texas) on June 2025.
The potential unlocking of value for monetization under fleet operation likely to made effective by the billions the company has expended on AI infrastructure provides support for speculative buy-ins despite the poor earnings.
The third trigger would likely be Mr. Musk himself, who had been deeply entrenched in building out a government spending efficiency initiative titled “Department of Government Efficiency” (or “DOGE”) for a number of months since President Trump’s second term began. During the call, Mr. Musk stated that, from May onwards, his involvement with “DOGE” will be reduced8 to one to two days per week.
It is no secret that a significant/vocal fraction of Tesla fandom/investor base centers around expectations of Mr. Musk’s personal and continual involvement with the company. Nowhere was this more apparent when the board of directors was largely compelled via popular vote to confer Mr. Musk – who already owns nearly 13%9 of the company’s shares – options awarding a paltry 0.1% of shares outstanding at a value that, if exercised even at present-day stock prices, would wreck the company’s free cash flow for years to come. Owning the options thus meant a definitive hand in steering the company’s future regardless of machinations by other large-volume institutional shareholders.
In a company with this distinct a conviction in its CEO, the stock price was bound to rise with news of his return to the helm – even if said helm was never really relinquished and despite the fact that the company has a deep bench of competent professionals.
Market players aren’t always rational, regardless of what textbooks claim. Perhaps said textbooks are due for a rewrite.
In ConclusionThe language, facts and assertions made during the earnings call seem to indicate that the company is well on the cusp of evolution from “pureplay EV carmaker” to “autonomous fleet solutions provider”. In terms of speculation, this is a significant paradigm that the company expects to inch into reality over the course of the next year. This speculation is grounds enough to transform the stock’s valuation from “value” to “stock”. BEV manufacturing isn’t an innovation anymore; autonomous solutions (on the other hand) are.
If there was a dip in stock price after the earnings release, there might have been a case to proclaim “buy the dip”. However, the stock never dipped, which implies that even instituitional players (both tactical and strategic) are buying into the idea of the paradigm. Of course, tactical players would like to realize gains so a slight softening of the stock price can be expected over the course of this week and the next.
Growth investors already invested will likely not see a substantial reason to join in on the selloff. The speculative nature of the company’s transformation, however, might not be a massive reason for substantial buy-in from investors not exposed to the stock. All in all, conviction is bound to be fairly balanced and the next earnings release (i.e. post-Cybercab pilot launch) is likely to be very interesting. Tesla remains a company to watch.
Professional investors in Europe might like to consider the +3x Long Tesla ETP (TSL3) for magnified exposure during upticks of the stock’s trajectory while the -3x Short Tesla ETP (TS3S) can be employed during downturns for magnified gains.
Footnotes:
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