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Torsdag Oct 19 2023 16:23
5 min
Electric vehicle and clean energy firm Tesla posted quarterly results on Wednesday that fell short of Wall Street projections due to the impact of its recent series of price reductions for electric vehicles, which exerted downward pressure on margins.
In the wake of these results, the Tesla share price took a 6.85% hit in pre-market trading on Thursday, with the stock hovering around the $226 mark.
The company reported adjusted earnings per share (EPS) of $0.66, accompanied by revenue amounting to $23.35 billion. Analysts surveyed by Investing.com had expected an EPS of $0.73 on revenue of $24.32 billion for the Elon Musk-led firm.
Gross margins, excluding credits, have been closely monitored in light of recent cuts in electric vehicle prices, slowed to 16.1% in Q3 from 18.7% recorded in Q2.
According to a statement by the company, Tesla delivered 435,000 electric vehicles in Q3, marking a decline from the 466,140 units delivered in Q2 due to upgrades and enhancements taking place in various factories.
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Shares reversed early after-market gains and sank after cautious commentary by CEO Elon Musk. On the earnings call, he said:
“I’m worried about the high interest rate environment we’re in. If interest rates remain high or if they go even higher, it’s that much harder for people to buy the car.”
Musk later noted: “I just can’t emphasize enough how important cost is. …. We have to make our products more affordable so people can buy it.”
Another key factor driving the selloff were Musk’s comments on the Cybertruck — Tesla’s battery electric pickup truck whose first deliveries are planned for November 30, 2023. Musk urged to ease expectations for the product:
“It is going to require immense work to reach volume production and be cashflow positive at a price that people can afford... […] I just want to temper expectations for Cybertruck. It’s a great product, but financially, it will take a year to 18 months before it is a significant positive cash flow contributor.”
The company still hasn’t announced exact specs or pricing for the Cybertruck.
Wall Street analysts are sounding increasingly concerned about the near-term Tesla share price outlook, especially after Musk's comments.
Goldman Sachs analysts, who lowered the price target by $30 to $235 per share, said in a note:
"We believe the 3Q report will add to near-to-intermediate term investor concerns given company commentary that the current macro backdrop/higher rates could gate its growth (including how quickly it ramps factories), and comments that the initial Cybertruck ramp could be slow.”
Citi analysts said the results were worse than they anticipated. They also cut the price target, going from $271 to $255 per share.
"We expect the shares to come under some pressure on these results. Tactically, we prefer staying on the sidelines pending a more convincing entry point with visible NT fundamental catalysts."
Not all analysts were downbeat on Tesla stock following Wednesday’s earnings call. RBC Capital Markets Tom Narayan said the markets may be missing the bigger picture, saying that Tesla’s profits from batteries, charging capabilities and other supplementary products could come into focus in the future. In a comment cited by MarketWatch, Narayan also noted to watch out developments in Tesla’s Full Self-Driving (FSD) system:
“Investors will likely focus their attention on the cautious commentary on 2024 and on the potential delay of the Next Gen product, but we suspect this could be all part of a master pivot from being a volume car maker to becoming a Tier 1 supplier to [original equipment manufacturers].”
“Tesla’s cars can still be a proof of concept and make money on selling [Full Self-Driving] subscriptions, but we think selling power electronics, batteries, charging, and ultimately FSD, could be far more profitable.”
While recognizing that consensus expectations on 2024 deliveries could come down before the next report, Narayan reaffirmed his Outperform rating on Tesla shares. However, he did make an adjustment to his price target for the stock, reducing it from $305 to $301.
At the time of writing on Thursday, TSLA shares were trading at $227.93, down close to $15 (over 6%) in pre-market trading, as per MarketWatch data. Tesla stock has lost close to 8% over the past three months, but has practically doubled its share price year-to-date, having risen by over 97%.
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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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