Tesla (TSLA) shares edged lower Monday after the carmaker unveiled a fresh round of U.S. price cuts, raising further questions about the health of EV demand heading into the early months of the year.
Tesla shares have shed more than $200 billion in value over the past six months and are by far the worst-performing stock of the so-called Magnificent 7 tech giants as investors continue to reprice the group in the face of a pullback in demand, slumping profit margins and headline risks tied to CEO Elon Musk.
The group itself in fact hinted at pending U.S. layoffs last week amid reports that performance reviews for some employees have been canceled and managers have been asked to make a “binary” assessment of roles across the company.
Tesla recorded deliveries of 485,000 over the final three months of last year, but fading demand, a series of price cuts, and costs linked to artificial-intelligence projects and the delayed Cybertruck took big chunks out of its bottom line. Tesla’s profit margins, probably the metric most closely tracked by Wall Street analysts, narrowed to 17.6% in the fourth quarter of 2023. That compares with a 23.8% margin over the same period in 2022 and analysts’ estimates of around 18.3%.
The group also warned that 2024 vehicle-delivery growth rates would be “notably lower” than 2023 levels.
Reports Monday, meanwhile, suggest Tesla is issuing a temporary price cut of some of its Model Y cars in the U.S., echoing similar moves in China ahead of that country’s Lunar New Year holiday.
Musk: ‘Essential quandary of manufacturing’ Tesla lowered the price of its rear-wheel and long-range Model Y by $1,000, to $42,990 and $47,990 respectively, with the new prices valid until the end of this month.
Musk said the cuts are an attempt to address “the essential quandary of manufacturing: Factories need continuous production for efficiency, but consumer demand is seasonal. Tesla: Cloudy with a chance of long-term gains Wedbush analyst Dan Ives, however, who carries an outperform rating with a $315 price target on Tesla, remains firm in his long-term conviction for the stock.
“We could not disagree more with the ultra negative Tesla narrative building and forming a black cloud over the stock,” he said.
“While the next few months are clearly a bit cloudy for the Tesla story and overall EV demand, longer term our view is that by the end of the decade ~20% of autos will be EV with autonomous and a reality and not a dream/aspiration.” Full-Self-Driving is Tesla’s premium driver-assistance system.
“We believe despite not committing to it on the [fourth quarter earnings conference call in late January], the vast majority of price cuts are now done with gradual price increases/margin expansion likely over the next six months,” Ives added.
Tesla shares were marked 0.3% lower in premarket trading to indicate an opening bell price of $193.00 each, a move that would leave the stock down more than 22% so far this year.
