Tesla is on pace for its largest daily stock price drop in more than three months Thursday after reporting quarterly earnings that met analysts’ top and bottom line expectations but amplified Wall Street’s concerns about the Elon Musk-led electric vehicle maker’s ability to deliver on hefty profit expectations—particularly as the firm keeps cutting prices.
Though the company’s sales and earnings per share for the first three months of 2023 were in line with forecasts, the report contained ample evidence of a potentially worrisome financial picture, as Tesla reported an 80% year-over-year decline in free cash flow and a 41% year-over-year drop in operating margin.
Tesla’s stock slipped 9.4% in trading as of 2:10 ET, poised for its worst day since January 3 and wiping out $53.9 billion in market capitalization.
That tops the $47 billion total respective market caps of Ford and General Motors, Tesla’s biggest American competitors.
Tesla’s $519 billion market cap remains roughly ten times that of Ford and General Motors.
It was a “disappointing” quarter for Tesla, Bernstein analyst Toni Sacconaghi wrote in a Thursday note to clients, moving down his estimate for Tesla’s annual earnings by more than 20% and maintaining his $150 price target, implying 17% downside from Tesla’s share price at Wednesday’s market close.
Sacconaghi explained Tesla, which just cut prices on its vehicles for the sixth time this year, is “undermin[ing]” its profitability and will find it “very difficult” to maintain any price advantage in a “hyper-competitive” automotive market.
“With no rose colored glasses, margins are now a delicate issue that are keeping Tesla investors up at night,” Wedbush analyst Dan Ives wrote Thursday, cutting his price target for the stock from $225 to $215 Thursday. “The near-term margin pain for long-term demand… is a strategy [investors are] mostly on board with… however, this narrative must be carefully managed over the coming quarters.”
Musk shook off concerns about margins, saying on Wednesday’s earning call “pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin” and his firm will “harvest that margin in the future as we perfect autonomy.”
It’s been a wild ride for Tesla investors over the last three years, as the stock surged more than 600% between early 2020 and late 2021 before crashing more than 75% by late 2022. Tesla delivered a record 423,000 cars last quarter. Thursday marks the latest massive post-earnings move for Tesla stock: Shares have gained or lost an average of nearly 6% the day after its prior 10 earnings reports.
$8.3 billion. That’s how much Musk’s net worth tumbled Thursday, by far the largest daily drop of any billionaire, according to our estimates. Musk is worth $177 billion, about $65 billion less than the world’s richest man LVMH chairman Bernard Arnault, but about $50 billion more than Jeff Bezos, the next richest American.
Tesla Beats Revenue Estimates—But Stock Still Drops After Earnings Report Released (Forbes)
Here’s How Tesla’s Stock Performed After Its Last 10 Earnings Reports (Forbes)