Tesla (NASDAQ: TSLA) stock tumbled over 12% on Thursday after the EV giant cautioned investors about a slowdown in sales growth for the year. This warning came after the company posted weaker-than-expected fourth-quarter results.
Tesla (TSLA) issued a warning in a shareholder letter released on Wednesday, stating that their sales growth this year might significantly lag behind the 2023 rate. This comes as the company is introducing a more cost-effective, next-generation vehicle set to be manufactured at a facility near Austin.
Tesla’s letter highlighted that the company is navigating two significant growth periods. The first growth period is fueled by the worldwide distribution of Models 3 and Y, whereas the launch of the new vehicle is expected to drive the second growth period.
Under the leadership of billionaire Elon Musk, Tesla (NASDAQ: TSLA) reported an adjusted profit of 71 cents per share for the fourth quarter, with total revenue of $25.17 billion. This fell slightly short of FactSet analysts’ forecast, which had projected a profit of 73 cents per share and revenue of $25.64 billion.
The decrease in profits resulted from Tesla’s decision to lower prices globally throughout the year, a strategy intended to boost its sales and market share.
Analysts’ View on Tesla’s Earnings
In a note to clients, Dan Ives, an analyst at Wedbush, mentioned that the discussion of Tesla’s financial results on Wednesday led to widespread frustration.
In his analysis, Ives noted that investors, echoing sentiments from the previous quarter’s call, were eager to understand the implications of the declining margins and the constant global price reductions. However, they encountered a more cautious Musk, who shifted the focus to production, timelines for next-generation vehicles, and investments in Full Self-Driving (FSD) and Artificial Intelligence (AI). Rather than providing concrete guidance, the discussion revolved around the broader narrative of Tesla.
Ives wrote,
“Consistent with last quarter’s call, investors wanted to get their arms around the falling margins and constant, never-ending price cuts seen globally, but instead, we heard from a much more cautious Musk who focused on production, next-gen vehicle timelines, and FSD/AI investments where much of the larger Tesla story was talked about instead of concrete guidance.”
Despite these concerns, Ives remains bullish on Tesla. He believes that the adoption of electric vehicles by the mass market is imminent. However, he acknowledges that there are still hurdles to overcome.
Ives noted,
“This is a pivotal period for Musk to guide Tesla through, which will help shape (or haunt) its EV future.”
Jeffrey Osborne, an analyst at TD Cowen, stated that Tesla’s focus on electrical efficiency and battery technology investment will make it challenging for other electric vehicle (EV) manufacturers to keep pace in the near term. However, he also highlighted “a great deal” of risk associated with production in the upcoming quarters. This risk could potentially impact both margins and stock value as Tesla begins the expansion of new facilities in Germany and Texas, along with the launch of new vehicle models.
Tesla (NASDAQ: TSLA) Stock Reaction
TSLA stock fell by 12.13% on Thursday. The volume of shares traded was 196.26 million, higher than the average daily trading volume of 116.45 million.
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