Tesla Shares Plummet, Wiping Out $80 Billion Amidst Gloomy Earnings Call

Tesla witnessed a sharp decline in its shares, plummeting by 12% on Thursday and erasing a staggering $80 billion in market value. The dip followed the electric car giant’s cautionary statements about decelerating growth in electric car sales and the looming threat posed by Chinese competitors.

Closing at its lowest level since December 2022, Tesla’s market capitalization has taken a hit of $210 billion since the beginning of 2024. The company’s earnings presentation on Wednesday indicated a potential slowdown in sales growth for the year, signalling that it may fall notably short compared to the previous year. Tesla cited ongoing development of the “next-generation” vehicle, likely a more affordable model, as a factor contributing to this adjustment.

Despite a substantial 38% increase in deliveries in the previous year compared to 2022, Tesla fell short of its earlier target of achieving a 50% annual growth rate averaged over several years. The financial results for the last quarter disappointed investors, with adjusted earnings per share experiencing a 40% decline from the previous year. Revenue, though rising 3% to surpass $25 billion, still fell short of market forecasts.

This marks the second consecutive quarter that Tesla has failed to meet analysts’ earnings forecasts, following a series of better-than-expected results since the beginning of 2021. The company’s stock had doubled in price in 2023, but a weak start in 2024, with a 16% decline before Wednesday’s earnings report, contributed to the recent downturn.

Thursday’s market decline represents the largest one-day fall for Tesla’s stock since late April 2022, a period characterized by supply chain challenges due to the pandemic and a temporary factory closure in Shanghai, China, in response to a coronavirus outbreak.

Tesla’s fourth-quarter earnings highlighted increased pressure on profits, with the operating margin nearly halving to 8.2% from the same period in 2022. This was attributed in part to rising costs related to the production of the Cybertruck pickup, which commenced production at the end of 2023.

Analysts, including Dan Ives from Wedbush, criticized Tesla’s earnings call for providing “minimal answers” to concerns about shrinking margins. The call failed to offer insights into ongoing price cuts, margin structures, and fluctuations in demand.

Tesla’s rivalry with Chinese competitors, particularly BYD, intensified as Chinese automakers outpaced Tesla in sales for the last quarter of 2023. Elon Musk acknowledged the competitive prowess of Chinese carmakers during the earnings call, emphasizing their potential global success.

Despite the disappointing earnings, some analysts, such as Garrett Nelson from CFRA Research, believe Tesla’s upcoming lower-cost vehicle launch in the next few years could serve as a catalyst for the stock. Additionally, others, like Ben Barringer from Quilter Cheviot, express optimism about Tesla’s prospects in a changing economic environment, anticipating a positive impact as interest rates start to decrease.