Tesla shares fell as much as 11% after the market started Thursday, wiping $73 billion off the company’s market worth just hours after warning of slowing growth in electric car sales and an existential threat from Chinese rivals.
In an earnings presentation Wednesday, the world’s most valuable automaker stated that its sales growth this year “may be notably lower” than last year as it proceeded to develop the “next-generation” vehicle, which is likely to be a lower-cost model.
While Tesla announced a significant 38% increase in deliveries last year compared to 2022, it had previously projected a 50% annual growth rate over several years.
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Tesla Shares Plunge To Wipe Out $73 Billion In Market Value, After Dour Earnings Call
Tesla’s financial reports for the fourth quarter were likewise disappointing, with adjusted earnings per share falling 40% from a year ago and revenue rising 3% to $25 billion, falling short of market expectations.
The company fell short of analysts’ earnings forecasts for the second quarter in a row, following a streak of better-than-expected results dating back to the beginning of 2021.
The stock doubled in price during 2023, but the gains came in the first half of the year, and Tesla shares were off to a slow start in 2024, sliding 16% before Wednesday’s results announcement. The stock is trading at its lowest level since April of last year.
Thursday’s intraday losses were similar to an extraordinarily big one-day drop of 11.4% in late December 2022. At the time, investors were concerned about Tesla’s sales and profitability and the state of the US economy.
Tesla’s fourth-quarter earnings also highlighted that profitability is under pressure. The company’s operating margin nearly halved to 8.2% from the same time in 2022, owing to increased costs associated with manufacturing the Cybertruck pickup. The new model began production around the end of 2023.
Tesla Shares Plunge To Wipe Out $73 Billion In Market Value, After Dour Earnings Call
Wedbush analyst Dan Ives said Tesla’s earnings call presented investors with “minimal answers” to the company’s declining profitability.
“We were dead wrong expecting Musk and team to step up like adults in the room on the call and give a strategic and financial overview of the ongoing price cuts, margin structure, and fluctuating demand,” he said in a note to investors on Thursday.
Threat from China
Tesla has been lowering costs for over a year to improve sales as it faces increased competition in China.
In the final three months of last year, China’s BYD outsold Tesla for the first time.
On Wednesday, Musk told analysts that Chinese carmakers were “the most competitive car companies in the world” and “will have significant success outside of China.”
“Frankly, I think if there are no trade barriers established, they will pretty much demolish most other car companies in the world,” he said.
Tesla Shares Plunge To Wipe Out $73 Billion In Market Value, After Dour Earnings Call
Rising competition from BYD and other Chinese automakers has prompted an anti-dumping probe by European officials, which could result in increased duties on Chinese car imports. Dumping is the practice of exporting goods to a country at prices that are lower than their actual cost.
Looking up?
While Tesla’s earnings were “disappointing and uncharacteristic,” Garrett Nelson, a senior equities analyst at CFRA Research, believes that releasing its lower-cost vehicle in the coming years will offer “the catalyst the stock needs,” he wrote in a note Wednesday.
Ben Barringer, a technology analyst at Quilter Cheviot, is likewise bullish. He believes the broader economic situation is beginning to swing in Tesla’s favour.
“Interest rates will start to drop. This will be a significant benefit to Tesla and the larger automotive industry, as buyers choose to finance their vehicles,” he wrote in a note Thursday.
SOURCE – CNN
