Investors’ blow to Tesla. The electric car maker’s multimillion-dollar stock market valuation is based on the premise of strong growth. However, the company’s revenue increased only 3% in the final quarter of 2023 (and 1% for the automotive sector), partly due to lower prices. Not only that, the company warned that volume sales growth in 2024 will be “significantly lower” than that seen last year. Given all this, Tesla shares plummeted on the stock market this Thursday. The decline exceeded 13% and at the close of the session it was 12.13%, falling to $182.63 per security. This represents a loss in stock market value of approximately 80 billion dollars (approximately 74 billion euros) in a single day.
“In 2024, our vehicle volume growth rate may be significantly lower than the growth rate achieved in 2023, as our teams work to launch the next generation vehicle at the Texas gigafactory.” This was the sentence in the quarterly earnings report that set off the alarm bells. Added to this is that in the fourth quarter the American company’s sales increased by only 3%, to 25,167 million dollars (approximately 23,000 million euros, at current exchange rates). Curiously, profits skyrocketed, but by an extraordinary $5.9 billion in tax-deferred assets.
Josh Gilbert, a market analyst at eToro, pointed out in a note that the company “failed in most key indicators” as “profits, revenues and gross margins fell short in the fourth quarter.” However, in his opinion, the accounts had a positive note, namely the automotive gross margin. Despite these data, according to Gilbert, “long-term investors still have many catalysts for optimism: declining battery costs, the outlook for long-term trends in electric vehicle demand, Tesla’s investments in artificial intelligence and the evolution of its solar business.”
It remains to be seen to what extent this “significantly lower” growth in volumes will translate into the evolution of monetary income. It will depend on the evolution of prices. “We continue to believe that Tesla will have to lower prices and experience lower margins to drive volume above last year’s 1.8 million level,” analysts at investment firm Bernstein said. “While 2024 will be a difficult year, it is increasingly clear that 2025 is unlikely to be better, with continued pressure on growth and margins,” they add.
In the analyst conference, Elon Musk confirmed that Tesla is preparing to launch a new model towards the end of 2025. “Once launched, it will be far superior to any other existing manufacturing technology in the world. “It’s the next level,” he said. Tesla has historically been optimistic about time estimates, which are often delayed. Furthermore, in this case the risk is greater because the production process will be “revolutionary”, according to the company. “We believe that large-volume availability of the Model 2 could only begin in 2026, assuming the production chain is not as difficult as Tesla experienced with its other new models (Cybertruck, Model 3), which is not assured.” , says Bernstein.
Musk’s comments about his desire to have more control over Tesla are also not popular with investors. The businessman received unprecedented multimillion-dollar stock awards. Then he sold shares to invest in other businesses (like buying Twitter) and now he complains that his stake is not high enough and says he aspires to have 25% and that if he doesn’t succeed, he will take it into consideration developing artificial intelligence and robotics capabilities outside of Tesla.
A 25% stake would prevent him from being pushed out by “activists” or the influence of stock advisory firms, he argued. “I’m not looking for additional profits. I just want to be an effective steward of a very powerful technology,” she said. “That’s what I’m aiming for, strong influence, but not control. If there was a way to achieve this, that would be great,” he said. “I see the path to creating an AI and robotics giant with truly immense capacity and power,” he said, adding that a two share class structure would be ideal, but it’s not an idea that will convince the market .
Much of Tesla’s valuation is tied to the development of these technologies, and none of the options that Elon Musk appears to have left on the table are positive for the company: take those assets, which would decrease Tesla’s value, or receive a large block of stock , which would dilute the participation of the rest of the shareholders.
In the cumulative year, Tesla shares tumble 26% on simultaneous concerns about lower demand for electric cars and growing competition in the industry. Tesla ended 2023 as the market leader, but lost share and its margins eroded due to the price cuts it had to undertake. China’s BYD took away global leadership in electric car sales in the fourth quarter. In the analyst conference this Wednesday, Musk said that without protectionist trade policies, Chinese cars will wipe out the rest.
Automakers, suppliers and even rental car companies have warned that interest in electric vehicles is waning. General Motors and Ford are scaling back their expansion plans in the segment, while Hertz is selling part of its electric fleet to replace those vehicles with gasoline-powered cars.
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2024-01-25 21:03:53
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