Tesla (TSLA) will release its first-quarter earnings tomorrow, April 22, after markets close. The Elon Musk-run company is heading into the confessional as one of the worst S&P 500 Index ($SPX) stocks, with a year-to-date drawdown of over 40%.

Tesla is the first constituent of the “Magnificent 7” to report its quarterly earnings – a group it is underperforming badly this year. While such massive underperformance ahead of earnings usually sets the stage for a “positive surprise,” it is hard to be bullish on TSLA stock ahead of its Q1 report.

Tesla Q1 Earnings Preview

Analysts expect Tesla’s Q1 revenues to increase just slightly, to $21.5 billion. This muted growth is not a surprise, as Tesla reported a 13% annual decline in its Q1 deliveries. The company’s GAAP earnings per share (EPS) are projected to be flat while adjusted EPS are expected to fall 6.1% year-over-year. 

For the full year, consensus estimates call for Tesla’s revenues to rise 9.4%. However, I believe this estimate will prove to be too high considering the slowdown in the company’s automotive business that accounts for the bulk of its revenues. Tesla’s shipments fell by double digits in Q1, and while current estimates call for deliveries to rise this year, Tesla’s hopes of pulling off delivery growth seem increasingly bleak. 

Tesla’s Growth Has Sagged

Notably, last year Musk said that Tesla’s 2025 deliveries could rise by up to 30% YOY. However, in its Q4 2024 shareholder deck, the company toned down that forecast by saying it expects the “vehicle business to return to growth in 2025.” Incidentally, Musk was optimistic about Tesla’s ability to grow its shipments in 2024, but the company ended up reporting an annual fall in deliveries. It marked the first time that the electric vehicle (EV) giant reported a yearly decline in deliveries. 

Tesla has failed to come up with a compelling vehicle since its best-selling Model Y, and the much-hyped Cybertruck appears to be a disaster of sorts. A lot was riding on the long-awaited affordable car, but reportedly, its production timeline has been pushed to 2026.

As for the bottom line, the less said, the better. Tesla’s GAAP EPS fell by over 22% in each of the last two years as its margins nosedived due to the price cuts, which it announced to spur deliveries. While Musk believes that Tesla can more than make up for the price cuts by earning money through subscriptions such as for its full self-driving (FSD), things are not looking too rosy on that front either.

Chinese Companies Are Giving Away Autonomous Driving Features for Free

Chinese EV companies are increasingly making autonomous driving a standard feature in their cars, with many, including BYD (BYDDY), offering it for free. While arguably Tesla’s full self-driving (FSD) is more advanced than what an average Chinese automaker offers, there remains a question mark over Tesla’s ability to charge higher prices. There are signs that demand for Tesla’s FSD is tepid at higher prices, and Tesla has already cut the price twice to $8,000. At its peak, Tesla was offering its FSD for $15,000, and Musk previously said that the price could rise as high as $100,000.

Apprehensions are also being raised over Tesla relying on cameras instead of radars and LIDAR for its self-driving feature. YouTuber Mark Rober showed in one of his videos that a wall painted as a road could fool the company’s autonomous driving system.

While some have been skeptical about the video and a separate video shows a Tesla Cybertruck, which has a more recent computer system, detecting the wall, the fact remains that FSD is still not fully autonomous, and regulators are investigating several instances of crashes involving the software. Tesla is looking forward to starting its robotaxi operations in Austin in June, but its autonomous driving software, which would power these cars, is still far from perfect. 

Along with falling deliveries, sales, and profits, Tesla is also grappling with a brand issue given Musk’s close association with President Donald Trump. Tesla facilities have faced vandalism, including acts of arson by protestors, as the company is seen as a face of the administration.

Musk’s Politics Are Hurting Tesla

Globally, Musk’s embrace of right-wing politics seems to be hurting Tesla’s sales, as was visible in Q1 in Europe. Tesla has also been losing market share in China to domestic Chinese companies. While several other factors, especially the competitive models offered by Chinese EV companies, are to blame, Tesla has also been in the crossfire of the U.S.-China trade war, which looks set to escalate further before some sanity eventually returns.

TSLA Stock Forecast: Even the Bulls Turn Wary

Brokerages have been slashing Tesla’s target price heading into the Q1 confessional. Among those who cut the stock’s target price was Dan Ives of Wedbush, who had the Street-high target price of $550, which he lowered to $315. His target price is now not too far from the mean consensus target price of $304.83, which might see more cuts in the coming days as analysts adjust their forecasts to reflect the current macroeconomic environment.

As Tesla is set to report its earnings, I find it hard to be bullish despite the stock having lost half of its market cap from 2024 highs. There are many questions that Musk would need to answer on the earnings call tomorrow, including how long he intends to head Trump’s Department of Government Efficiency (DOGE), Tesla’s ability to grow shipments in 2025, rising competition from Chinese companies, the timeline for the low-cost car, and the scheduled launch of the robotaxi service. 

Tesla has been pushing the can down the road with futuristic products like robotaxis, humanoids, and supercomputers. However, with the present looking so uncertain, the long-term growth story might not find many buyers, especially with TSLA trading at a triple-digit price-to-earnings multiple that is roughly thrice what an average tech company trades at.