In a surprising turn of events, the share price of electric car pioneer Tesla plummeted. The fall follows reports of third-quarter earnings that fell below market expectations and warning notes from company CEO Elon Musk
Earnings Report and Market Response
Tesla’s public disclosure of its third-quarter results raised concerns among investors. The company reported revenue of $23.35 billion and earnings of 66 cents per share, adjusted. These figures failed to meet Wall Street estimates, causing Tesla to experience its first decline in revenue and earnings since the second quarter of 2019
The market reacted swiftly, with Tesla shares nose-diving more than 9% in a single day. The sharp fall reflects strong disappointment among investors.
Elon Musk’s Cautious Commentary
During Tesla’s quarterly conference call with investors, CEO Elon Musk made a series of comments that highlighted his concerns about the global economic environment Musk highlighted the challenges posed by a particularly high interest rate environment, making it more difficult for customers to buy a car.
Musk emphasized the need to make Tesla’s products more affordable to ensure accessibility for a broader consumer base. He signaled that this would be a priority before fully committing to the construction of a new factory in Mexico.
“We have to make our products more affordable so people can buy it,” Musk stated during the call.
Analyst Reactions
Analysts on Wall Street were quick to respond to the disappointing results and Musk’s cautious commentary. Bank of America reiterated their neutral rating on Tesla’s stock and adjusted their estimates for the fourth quarter and beyond, citing a “lower gross margin profile.” They also noted their surprise at the extent to which Musk delved into the global economic conditions during the conference call.
Morgan Stanley analysts shared a similar sentiment, acknowledging that Tesla’s third-quarter results were a cause for concern, but they believed it was Musk’s cautious commentary on the economy that influenced the immediate market reaction. They raised questions about whether this caution was primarily due to competition or a potential decrease in demand.
Deutsche Bank analysts expressed their worries regarding Tesla’s challenging fundamentals heading into the next year, citing concerns about vehicle demand, growth outlook in 2024, the slow and expensive ramp-up of the Cybertruck, and an uncertain timeline for the next-generation platform.
The recent drop in Tesla’s share price is a stark reminder of how unpredictable the stock market is. The combination of disappointing earnings and Elon Musk’s cautionary remarks about the global economy has investors and analysts nervous as the electric carmaker continues its journey and faces challenges and uncertainties that will determine n ‘ways in the coming years.