tesla (TSLA) stocks rose in early trading Thursday but are still stuck in one of the longest downtrends since the stock went public in 2010, as investors count the costs of declining demand for electric vehicles, weakening of profit margins and CEO Elon Musk's distracted leadership.
Many of those concerns, as well as the impact of supply chains disrupted by military strikes in the Red Sea and the suspected arson at a key manufacturing plant in Germany, combined to produce one of the largest quarterly delivery losses on record. for the world's leading electric vehicle manufacturer. .
Tesla delivered just under 387,000 new cars to customers during the three months ending in March, a 20% decline from the record 494,000 it posted in the final months of last year and about 8.5% less than the levels from the previous year.
The count also fell well short of Wall Street's forecast of 455,000, marking the biggest miss of estimates since the Street began compiling data in the mid-2010s.
The weak delivery numbers, which followed a warning from Tesla earlier this year that full-year totals would be “noticeably lower” than in 2023, will add a new and likely bearish dimension to first-quarter earnings. group, given the current pressure on its profit margins. Tesla is scheduled to present its first quarter report on April 23
Tesla: more margin weakness ahead
Tesla's profit margins, probably the most closely watched metric by Wall Street analysts, fell to 17.6% for the three months ended in December, down from a 23.8% margin in the same period a year earlier.
Weaker-than-expected sales figures from China, where volumes last month fell to the lowest levels in more than a year, are also adding to overall pressures on the market's aggressive full-year delivery targets.
Morgan Stanley Adam Jonas, however, sees the weak first quarter update as further evidence of a “restructuring” phase in the electric vehicle market. He revised his own delivery count for 2024 down by around 250,000 units, to 1.75 million units. That would be a 3.3% decrease from 2023 levels.
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Jonas, who lowered his Tesla price target by $25 to $320 per share just last month, cut another $10 from Thursday to take it to $310. But he left his buy rating intact.
“Negative developments in the global electric vehicle market are very important for Tesla and should reasonably have a near-term negative impact on the stock price,” Jonas said in a client note titled “Near Term Fearful vs. Long “Term Greedy.”
“We believe the numbers bottomed out with the second quarter results, well before a major rejuvenation of the model cycle,” Jonas added.
Jonas, who has long touted Tesla's potential beyond its core auto manufacturing business, stressed that investors should not ignore the “continued developments of Tesla's other activities, many of which are automotive-related.” , as well as “other areas that we do not include within our target of $310.”
Tesla's other projects still have value
Jonas has argued that Tesla should be valued above its current market price based on other business dynamics tied to electric vehicle sales. These include licensing its Full-Self-Driving driver assistance system, as well as its battery, power and insurance divisions.
The analyst also says Tesla's DoJo supercomputer, which is powered by artificial intelligence technologies, could add more than $500 million to Tesla's market value “through a faster adoption rate in mobility (robotaxis) and services.” network (software as a service)”.
Musk himself called the competition for ai engineers “the craziest talent war I've ever seen.” He told his 180 million followers on his social media website of vehicles.
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Analysts expect Tesla to post a bottom line of about 56 cents a share for the three months ended in March, down a third from 85 cents a share in the same period a year earlier, on revenue of about $26.05 billion.
Gross profit margins, according to Refinitiv forecasts, are likely to decline to around 17%, with estimates ranging from 14.7% to 20%.
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Tesla shares are up 0.78% in recent pre-market trading, indicating an opening price of $169.70 each. Such a move would still leave the stock down more than 31.5% for the year.
Short interest in the stock remains very high, with data from S3 Partners suggesting it hit a 2024 high of 3.9% of the outstanding float last week.
Betting against the group has also been very profitable: short sellers have raised more than $5.77 billion so far this year, according to S3 data.
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