Tesla's stock falls as the business reports declining earnings
Tesla's stock dropped 12% in early trading on Wednesday following the company's quarterly report, which revealed declining profitability despite sluggish sales and heightened competition.
The earnings announcement did not meet the profit projections of Wall Street.
Elon Musk, the CEO of Tesla, told analysts on Wednesday that "quite a few competing electric vehicles that have entered the market and mostly, they have not done well, but they have discounted their EVs quite substantially, which has made it more a bit difficult for Tesla."
At the beginning of 2024, Tesla's stock fell more than 25%, but the company recovered all of those losses this month when it revealed an improved-than-expected report on car deliveries. The Wednesday stock price drop places shares at their lowest point in almost three weeks.
Two quarters in a row of diminishing profits are shown by the earnings reports that were released on Tuesday. More than half of the company's profits, or $890 million, came from revenue from government credits in the most recent quarter.
Although the company suffered in its primary business of selling cars, Gordon Johnson, the CEO and creator of data firm GLJ Research, who is pessimistic about Tesla, claimed that the increase in revenue from government credits provided the company with a financial lifeline.
"What does the main business do?"
Johnson said that the performance drop was more severe than the earnings would suggest.
Critics claim that the company's inability to introduce a new, cost-effective model and the general softening of the EV industry are the reasons behind the decline in demand for its cars. Analysts earlier told ABC News that Tesla would have a challenging time regaining its past rapid growth as rivals release alternatives.
However, supporters highlight the business's track record of leading the industry in innovation, speculating that as it prepares for new EV models and refines its autonomous driving software, the innovations that propelled its sprint ahead of the competition may resurface.
Bullish on Tesla, Dan Ives, a managing director of stock analysis at Wedbush Investment Group, played down the company's lower-than-expected profits announcement and emphasized the potential benefits of its autonomous car development.
"We did not anticipate significant fireworks from Tesla this quarter," Ives said in a note to investors on Wednesday. "We think that autonomous, robotaxis, and AI will play out for Musk & Co. in the next phase of the Tesla growth story, and that vision is almost here."
Speaking to analysts on Tuesday, Musk stated that during the most recent quarter, the business has made "a lot of progress" with its full self-driving software.
According to Musk, "we think customers will experience a step-change improvement in the performance of supervised full self-driving."
However, that product has encountered difficulties. About 2 million Tesla vehicles were recalled in December due to a safety concern with the autopilot feature. After two months, the business recalled roughly 360,000 more vehicles due to crash hazards associated with its autonomous driving technology. Musk announced on Tuesday that the Robotaxi service will not begin until October.
Johnson from GLJ Research expressed doubts over the Robotaxi project.
