Tesla shares plunge to wipe out $73 billion in market value, after dour earnings call

Shares in Tesla plunged as much as 11% after the market opened Thursday, wiping $73 billion off the company’s market value hours after it warned of slowing growth in electric car sales and an existential threat from Chinese rivals.

In an earnings presentation Wednesday, the world’s most valuable automaker said its sales growth this year “may be notably lower” than last as it continued developing the “next-generation” vehicle, likely a lower-priced model.

While it reported a sizeable 38% increase in deliveries last year compared with 2022, Tesla had previously targeted a 50% annual growth rate averaged over several years.

Tesla’s financial results for the last quarter also disappointed, with adjusted earnings per share down 40% from a year earlier, and revenue, which rose 3% to top $25 billion, coming in below market forecasts.

Brand new Tesla cars sit parked at a Tesla dealership on October 18, 2023 in Corte Madera, California.

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It was the second straight quarter the company fell short of earnings forecast by analysts, following a string of better-than-expected results stretching back to the start of 2021.

The stock doubled in price during the course of 2023, but those gains came in during the first half of the year and Tesla shares were off to a weak start in 2024, falling 16% before Wednesday’s earnings report. The stock is currently trading at its lowest level since April last year.

Thursday’s intraday losses were comparable to an unusually large one-day fall of 11.4% in late December 2022. At the time, investors were worried about the outlook for Tesla’s sales and profitability, as well as the health of the US economy.

Tesla’s fourth-quarter earnings also revealed profits under pressure. The firm’s operating margin almost halved to 8.2% from the same period in 2022, driven partly by an increase in costs related to the production of the Cybertruck pickup. The new model went into production at the end of 2023.

Dan Ives, an analyst with market research firm Wedbush, said Tesla’s earnings call provided investors with “minimal answers” to the company’s shrinking margins.

“We were dead wrong expecting Musk and team to step up like adults in the room on the call and give a strategic and financial overview of the ongoing price cuts, margin structure, and fluctuating demand,” he wrote in a note Thursday.

Threat from China

Tesla has been cutting prices for more than a year in an effort to boost sales as it faces intensifying competition from rivals in China.

China’s BYD beat Tesla in the final three months of last year, selling more cars than Elon Musk’s carmaker for the first time.

Musk told analysts on the Wednesday call that Chinese carmakers were “the most competitive car companies in the world” and “will have significant success outside of China.”

“Frankly, I think if there are not trade barriers established, they will pretty much demolish most other car companies in the world,” he said.

Rising competition from BYD and other Chinese automakers has sparked an anti-dumping investigation by European officials, which could lead to the imposition of higher tariffs on car imports from China. Dumping refers to the practice of exporting goods to a country at prices that do not reflect their cost.

Looking up?

While Tesla’s earnings were “disappointing and uncharacteristic,” Garrett Nelson, a senior equity analyst at CFRA Research, expects the launch of its lower-cost vehicle in the next few years to provide “the catalyst the stock needs,” he wrote in a note Wednesday.

Ben Barringer, technology analyst at Quilter Cheviot, is also optimistic. He thinks the broader economic environment is starting to turn in Tesla’s favor.

“Interest rates will start to come down. This will be a real positive for Tesla, as well as the wider automotive sector, as consumers tend to buy their vehicles on finance,” he wrote in a note Thursday.

Chris Isidore contributed reporting.