Palo Alto, California – October 20, 2023
Tesla, the pioneering electric automaker, witnessed a significant decline in its shares on Thursday, following the release of its third-quarter results, which fell short of both top and bottom-line expectations. The company’s CEO, Elon Musk, also shared a cautious perspective on the global economic landscape during the quarterly call with investors, causing concerns among some analysts.
Tesla’s Q3 report unveiled a revenue of $23.35 billion and adjusted earnings of 66 cents per share, falling short of Wall Street’s expectations. Notably, this is the first time since Q2 2019 that Tesla missed both earnings and revenue estimates.
Elon Musk’s comments about the global economy drew attention as he expressed concerns about the impact of high interest rates on consumers’ car-buying capacity. Musk stressed Tesla’s commitment to reducing vehicle costs, emphasizing affordability as a priority before commencing the construction of a new factory in Mexico. “We must make our products more accessible for people to afford,” Musk underscored during the call.
Bank of America analysts reaffirmed their neutral rating on Tesla’s stock and adjusted their estimates for Q4 and the future, primarily due to the company’s “reduced gross margin profile.” They were also surprised by Musk’s significant focus on the broader macroeconomic environment.
Similarly, Morgan Stanley analysts noted that Tesla’s disappointing Q3 results were overshadowed by the “cautious commentary” regarding the economy, which influenced the immediate stock response. They described the Q3 conference call as one of the most cautious in recent years, recognizing the legitimate concerns about interest rates but also questioning whether Tesla’s caution was linked to competition or weakening demand.
During the investor call, Elon Musk tempered expectations for Tesla’s highly anticipated Cybertruck, a futuristic electric truck. Musk acknowledged that it would take a year or more for the vehicle to become a “significant positive cash flow contributor” and mentioned the challenges associated with mass production. “We’ve encountered difficulties with the Cybertruck,” Musk candidly admitted.
This cautious stance on the Cybertruck raised concerns among Deutsche Bank analysts. They pointed out that Tesla’s Q3 earnings miss, combined with cautious remarks about vehicle demand, the 2024 growth outlook, the slow and costly ramp-up of the Cybertruck, and the uncertain timeline of the next-gen platform, reinforced their apprehensions about the company’s fundamentals in the upcoming year.
Tesla’s 2024 growth remains a topic of continued concern for the Deutsche Bank analysts.
The uncertainty surrounding Tesla’s performance and its outlook, combined with Musk’s candid commentary, have stirred conversations about the future of the electric vehicle giant in a rapidly evolving automotive landscape.