Shares of Tesla saw a sharp decline of over 9% following the release of their third-quarter results, as the electric automaker fell short of Wall Street’s expectations in both revenue and earnings. With revenue amounting to $23.35 billion and adjusted earnings of 66 cents per share, Tesla’s performance failed to meet the estimates. This marked the first time since the second quarter of 2019 that Tesla missed on both earnings and revenue, raising concerns among investors.
During Tesla’s quarterly call with investors, CEO Elon Musk expressed a pessimistic outlook on the state of the global economy, highlighting concerns regarding the high interest rate environment and its impact on consumer car purchases. Musk acknowledged the need to make Tesla’s products more affordable in order to increase consumer accessibility. He emphasized that before the company proceeds with plans to build a new factory in Mexico, their priority is to bring down the costs of their vehicles. This commentary on the broader macro environment drew the attention of analysts.
Analysts React with Caution
Analysts at Bank of America reiterated their neutral rating on Tesla’s stock and adjusted their estimates for the fourth quarter and beyond due to concerns over the company’s “lower gross margin profile.” They also expressed surprise at the extent to which Musk discussed the global economy. Morgan Stanley analysts shared a similar sentiment, stating that despite Tesla’s disappointing third-quarter performance, it was the cautious commentary on the economy that shaped the immediate stock reaction. They noted that the conference call was one of the most cautious they have heard in years.
Uncertainty Surrounding Cybertruck Expectations
During the investor call, Musk attempted to temper expectations for Tesla’s Cybertruck, suggesting that it may take a year or longer before the vehicle becomes a significant positive cash flow contributor. This statement raised concerns among Deutsche Bank analysts, who expressed continued doubts about Tesla’s growth potential in 2024.
The combination of Tesla’s missed earnings, Musk’s pessimistic commentary on the global economy, and concerns surrounding the Cybertruck has prompted a shift in investor sentiment. Share prices experienced a significant drop following the release of the third-quarter results, pointing to growing investor worry regarding Tesla’s future performance and ability to maintain its position in the electric vehicle market.
Tesla’s underwhelming financial results, combined with Elon Musk’s cautious commentary on the global economy and uncertainty surrounding the Cybertruck, have raised concerns among investors. Analysts have reacted with caution, adjusting their estimates and expressing doubt about Tesla’s growth potential. This has led to a noticeable shift in investor sentiment, causing a decline in Tesla’s share prices. As Tesla moves forward, addressing the challenges of affordability and competition will be critical for the company to regain investor confidence and sustain its position in the evolving electric vehicle industry.