Today, the electric vehicle (EV) giant Tesla (NASDAQ:) is poised to release its earnings report, a crucial event that will shed light on the company's financial performance. With Tesla grappling with several challenges, the current sentiment for Tesla stock is not optimistic.

Since the beginning of 2024, Tesla shares have experienced a significant decline, plummeting by more than 43%. This downward trend was further exacerbated by a 3% drop in Monday’s trading session.

The analyst consensus earnings per share estimate for the first quarter is $0.49. Analysts expect the company to report revenue around the $22.27 billion mark, representing a potential decline from last year. Tesla’s earnings per share in Q1 2023 came in at $0.85 on revenue of $23.3 billion.

Last week, analysts at Deutsche Bank downgraded Tesla to Hold from Buy, lowering the stock price target to $123 from $189 per share. The investment bank highlighted the fact that it has been warning investors about downside risk to Tesla’s deliveries, pricing and earnings through 2025.

Meanwhile, Wells Fargo cut its price target for Tesla to $120 from $125 in a recent note, telling investors they expect the Elon Musk-led company to miss Q1 consensus expectations. However, the investment bank did note that expectations are currently low following Tesla’s weak Q1 deliveries.

What analysts will be watching

Wells Fargo maintained its Underweight rating on Tesla shares. Looking ahead to the earnings release, the bank said the company’s poor fundamentals “may be overshadowed on the Q1 call by FSD 'razzle-dazzle'.”

However, “once the show is over, fundamentals should matter again.” Wells Fargo lowered its full-year deliveries forecast to -12% year-on-year from its previous expectations of deliveries being flat compared to last year.

“TSLA's positive guide is also at risk.We est. ~160K cars could be in inventory, adding to px risk. Low leasing also raises concerns,” added the bank. “We see moderating delivery growth driven by lower demand & diminished return on price cuts. We are cautious on margins given likelihood of more price cuts & lower volumes. Moreover, we are concerned about Model 2 demand & margins."

Elsewhere, analysts at BofA feel that Tesla will “face mounting profit pressure from a weaker demand environment.” The investment bank feels that unless TSLA taps into new geographical markets, it will be hard for the company to generate additional sales with its current product portfolio or without cutting prices further.

Morgan Stanley reiterated an Overweight rating and $310 price target on Tesla in a recent note. The bank said that for the stock to begin outperforming again, they believe consensus expectations must stop falling.

“Our current $1.12 EPS is well below consensus ($2.67) for non-GAAP FY24. And no, we do not suggest that we have ‘kitchen-sinked’ our forecasts this year,” said Morgan Stanley analyst Adam Jonas. “At a volatile time for the company’s operations, we believe $1.12 has roughly balanced probabilities of either upward or downward revisions.”

The analyst acknowledged that having said the above, they do find that based on discussions, investor expectations for Tesla EPS is closer to their number than sell-side consensus.