Tesla faces a sharp drop in stock prices, declining by 8%, following the release of its underwhelming third-quarter earnings report. Analysts’ predictions for the company were not met, which contributed to Wall Street’s disappointment. Even Tesla CEO Elon Musk’s comments about the future of the Cybertruck failed to reassure investors.
Tesla’s stock plummeted by as much as 8% on Thursday as a response to the company’s third-quarter results. These results fell short of analysts’ expectations, leading some analysts to raise concerns. Considering the disappointing figures, investors were unimpressed and reacted by selling off their shares.
During the conference call, Elon Musk, the CEO of Tesla, made comments that further worried investors. Musk cautioned that the production ramp-up for the Cybertruck would be an extremely challenging task. Musk humorously stated, “We dug our own grave with Cybertruck. Nobody digs a grave better than themselves.” Such remarks did little to alleviate concerns surrounding the future of the new electric pickup truck.
Wall Street analysts responded to Tesla’s third-quarter report in various ways. JPMorgan expressed skepticism and stated that Tesla’s current market valuation of nearly $800 billion appears increasingly unsustainable. They highlighted that despite implementing significant price cuts on all vehicle models, Tesla still struggled to deliver more vehicles. This could indicate an underlying issue with demand. JPMorgan further noted that Tesla’s third-quarter earnings before interest and taxes (EBIT) margin of 7.5% is no longer considered exceptional compared to other car manufacturers such as Ford and General Motors.
Dan Ives, an analyst at Wedbush, described the conference call as a “mini disaster” for Tesla’s bullish investors. Musk’s focus on declining profit margins and the challenges surrounding the production roadmap of the Cybertruck dampened investor enthusiasm. Musk also hinted that further price cuts on vehicles might be necessary due to the challenging macroeconomic environment. Although Wedbush maintained its “Outperform” rating on Tesla, they lowered their price target to $310 from $350.
Bank of America highlighted the negative impact of factory downtime and price cuts on Tesla’s profitability. The constant pursuit of affordability for a larger consumer base through price cuts poses an ongoing risk for the company. Despite recognizing Tesla’s efforts to reduce costs and its unique ability to adapt, Bank of America maintained a “Neutral” rating and lowered its price target to $290 from $300.
As Tesla’s stock experiences a significant dip, experts have raised concerns about its future performance. The missed analyst expectations, coupled with the uncertainties surrounding the Cybertruck and ongoing price cuts, have left investors cautious. Tesla’s ability to overcome these challenges and sustain its growth remains to be seen.
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