Tesla stock experienced a sharp decline of 12% on Thursday, reacting to the company’s recent earnings report, which fell short of expectations and included a cautionary note about a potential slowdown in 2024. This drop marked Tesla’s worst performance since September 2020, when it faced a 21% plunge.
In its earnings report released on Wednesday, Tesla reported revenue and earnings that missed market forecasts. Automotive revenue for the fourth quarter of 2023 totalled $21.6 billion, showing only a 1% increase year-on-year.
However, the primary concern among investors was Tesla’s outlook for 2024. The company indicated that vehicle volume growth might significantly slow down compared to the previous year, attributing this potential decrease to the focus on launching its “next-generation vehicle” in Texas. Tesla also noted that it is currently navigating between two major growth waves.
Short sellers capitalised on Tesla’s woes, reaping over $2.2 billion in profits since the previous day’s close, according to financial analytics firm Ortex Media. This downturn in Tesla’s stock price has resulted in a 27% decline for the year, following its impressive doubling in value throughout 2023.
Despite delivering 1.8 million cars in the previous year, Tesla has faced challenges in key markets like Europe and China, where it has been compelled to lower prices to remain competitive against emerging Chinese players like BYD and traditional automakers. These price adjustments have consequently impacted Tesla’s profit margins.
Furthermore, several brokerage firms have revised their price targets for Tesla downward, adding pressure on the company’s stock. Barclays, for instance, slashed its price target from $250 to $225, acknowledging the uncertainties ahead. Similarly, RBC analysts reduced their price target from $300 to $297, while Canaccord Genuity adjusted its target from $267 to $234, citing concerns about Tesla’s future performance.
In summary, Tesla’s recent stock decline reflects investor apprehension following a disappointing earnings report and a cautious outlook for 2024, compounded by downward revisions in price targets from various brokerage firms.
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