Tesla Stocks, the electric-vehicle maker, experienced a significant drop in its stock prices as it reported gross margins below 20%, for the first time in almost three years. The Tesla Stocks fell by 9.75% on Thursday, the lowest point since late January. Tesla’s earnings report showed a drop in profits from $3.3 billion a year ago to $2.5 billion, leading to numerous estimates of cuts as margin pressure concerns grew. The company has cut prices six times since the start of the year, two of which occurred in the second quarter, in an attempt to increase demand.
Determining the Profit Margins
Tesla’s CEO, Elon Musk, said on the earnings call that it was difficult to determine how low the company’s profit margins would be. Jefferies, an investment bank, maintained a Buy rating on Tesla but lowered its price target to $230 from $250 due to the company’s shrinking margins as a significant concern. Other analysts also cut their price targets on Tesla Stocks.
Tesla has increased its production and deliveries of electric vehicles over the past few quarters, leading to near-record levels of revenue. However, production has outpaced demand, with the company delivering 422,875 units in the first quarter while producing 440,808. Guggenheim Securities Vice President of Automotive Equity Research, Ronald Jewsikow, noted that the company is backed into a corner and that cutting prices is their only tool to increase demand.
Tesla Maintains its Significance
Tesla reported revenue of $23.33 billion for the first quarter, which was slightly below the Street’s estimate of $23.35 billion. The adjusted earnings per share came in at $0.85, lower than the estimated $0.86, and the net income was $2.9 billion, $700 million less than the same period a year prior. Elon Musk did have some positive news to share, stating that the company was aiming to have a “delivery event” at the end of Q3 for the Cybertruck.
Despite the drop in profits and margins, Tesla remains a significant player in the electric vehicle market. The company has already established itself as a leader in the industry and continues to innovate and push boundaries. However, it remains to be seen how the company will navigate the current challenges and maintain its position in the market.