Tesla Stock Heads Toward 8-Month Low After 23% Annual Profit Decline - Forbes

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Topline

Tesla stock tanked Thursday after the company’s earnings report fell flat, as Elon Musk’s electric vehicle goliath grapples with shrinking margins as it expands output.

Key Facts

Shares of Tesla were down roughly 9% to $190 about 45 minutes before Thursday’s official market open, pacing toward Tesla’s lowest opening price since May 26, 2023; the stock is now down about 25% in 2024.

In its fourth-quarter earnings report late Tuesday, Tesla reported $25.2 billion of sales and $0.71 earnings per share, missing average analyst estimates of $25.6 billion and $0.73, according to FactSet.

Tesla’s profits fell 40% last quarter compared to the final period of 2022, while revenue grew a more modest 3% year-over-year.

The slide in profits came as Tesla initiated a series of price cuts on its cars, sending profit margins down significantly, as its 17.6% gross margin during Q4 was its lowest mark since 2019, down more than 600 basis points from last year.

Tesla reported earnings per share of $3.12 for 2023, a 23% decline from 2022’s record $4.07; the company’s $16.6 billion in adjusted earnings before interest, taxes, depreciation and amortization was 13% lower than 2022’s $19.2 billion adjusted EBITDA.

Perhaps most worrisome was Tesla’s vague warning of “notably lower” output in 2024, as analysts slammed Musk and company’s lack of clear guidance.

Contra

Though the bottom line showed weakness, Tesla’s top line was stronger than ever, as its $96.8 billion in 2023 revenue was 19% higher than last year’s prior record.

Big Number

1.8 million. That’s how many electric vehicles Tesla delivered in 2023 following Q4’s record 484,507 deliveries. That equates to remarkable 127% annualized delivery growth over the past five years, but Tesla’s ability to convert the climbing vehicle sales into profit growth has left some investors queasy.

Key Background

In its last earnings report, Tesla missed on both sales and profit estimates, reporting its weakest revenue growth since 2020. Shares of Tesla sit about 50% below their 2021 peak even after doubling last year, reflecting apprehension toward Tesla's lofty valuation. Coinciding with Tesla’s extended slump on the stock market was an escalation in the oft-controversial behavior of Tesla’s CEO and top shareholder Musk, who sold a sizable portion of his Tesla stake in 2022 to fund his $44 billion of the social media platform then known as Twitter. Musk typically uses X to platform his frequently fringe political and social views, but last week used his site to push for increased voting power at Tesla.