Shares of Tesla took a significant hit, plummeting more than 9% following the release of the company’s third-quarter results. Both revenue and earnings fell short of Wall Street’s expectations, marking the first time since 2019 that Tesla has missed on both fronts. In light of this, investors are growing increasingly concerned about the future prospects of the electric automaker.
During Tesla’s quarterly call with investors, CEO Elon Musk shared his pessimistic views on the state of the global economy. He expressed concerns about the high interest rate environment, which he believes makes it more challenging for consumers to purchase cars. Musk stated that Tesla is actively working to reduce the costs of its vehicles, prioritizing affordability to ensure wider accessibility for potential buyers. He emphasized the need to make their products more affordable to drive sales.
Bank of America analysts reiterated their neutral rating on Tesla’s stock and lowered their estimates for the fourth quarter and future years. They pointed to the company’s “lower gross margin profile” as the primary reason for their revised figures. The analysts also noted their surprise at the amount of time Musk devoted to discussing the global economy during the call, indicating that his cautionary remarks about interest rates garnered attention.
Morgan Stanley analysts echoed similar sentiments, emphasizing that Tesla’s underwhelming third-quarter results were overshadowed by Musk’s cautious commentary on the economy. They described the conference call as one of the most cautious they had heard in years. Although they acknowledged the validity of concerns regarding interest rates, they questioned whether Tesla’s caution could also be attributed to competition or slowing demand.
During the investor call, Musk also tempered expectations for the highly anticipated Cybertruck. He cautioned that it would take at least a year, if not longer, for the vehicle to become a significant positive cash flow contributor. Deutsche Bank analysts expressed their ongoing concerns about Tesla’s growth prospects for 2024, further contributing to the overall uncertainty surrounding the company’s future performance.
Tesla’s disappointing third-quarter results reflect the challenges that the company faces amid a turbulent global economy. While falling short of revenue and earnings estimates, CEO Elon Musk’s cautious remarks drew significant attention from analysts. Concerns over interest rates, competition, and slowing demand have raised doubts among investors about Tesla’s ability to sustain its growth trajectory. The uncertainty surrounding the Cybertruck’s timeline and its potential impact on cash flow further exacerbate the unease in the market. As Tesla strives to make its vehicles more affordable and navigate the complexities of the global economy, the company’s future remains clouded with uncertainty.
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