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Chris La - Tuesday, January 30, 2024
How Much Trouble Is Tesla Stock In?
Over a year ago, Tesla (TSLA) initiated a price cut for its electric vehicles that hurt its investor's confidence. The company proved that the aggressive price war made competitive sense. It pushed the operating margins sharply lower for the industry, hurting its peers.
The price cut increased losses for Ford (F) EV models. Fisker (FSR), Lucid (LCID), and Rivian (RIVN) did not achieve economies of scale soon enough.
Last week, Tesla posted revenue growing by only 3.5% Y/Y to $25.17 billion. Capital expenses increased to $2.3 billion, compared to $1.76 billion last year. Although free cash flow increased, shareholders are concerned about the weak vehicle deliverables, lower FSD revenue recognition, and lower vehicle average selling price.
After its P/E fell from over 60 times to below 43 times last week, the declining margins ahead suggest that TSLA stock has selling pressure ahead. The stock markets may enter a long process of re-pricing Tesla as the care company growth struggles. The firm may need to depend more on Chief Executive Officer Elon Musk's media attention to increase brand awareness. For example, Musk may talk about the role of AI inference efficiency in the FDS rollout. In addition, Cyber trucks may dominate the EV truck market space.
CEO Musk mentioned Optimus humanoid robot on the conference call. Unfortunately, the market may look at the robot as a marketing tool rather than as something that adds innovation.
Watch out for selling pressure to persist for Tesla's stock.
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