June 13, 2024

Tesla shares plummet as analysts decry ‘train wreck’ investor call

Tesla shares plummeted more than 10 percent Thursday, wiping billions off the company’s valuation after CEO Elon Musk failed to allay concerns about stagnating growth and persistent price cuts on the company’s earnings call.

The electric-vehicle maker ushered in steep price cuts to maintain demand throughout 2023, resulting in 38 percent growth in vehicle deliveries that hardly translated into additional revenue, prompting worry from investors and analysts.

On Wednesday, Tesla reported quarterly results that missed analysts’ expectations, including annual revenue that grew by merely 3 percent despite significantly higher sales volume, and a forecast for a potential “notably lower growth rate” than in 2023 as it invests in a next-generation vehicle it says it will begin building in 2025.

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Meanwhile, Musk is asking for more control over the company after drawing down a significant portion of his Tesla stock amid his purchase of Twitter in 2022.

“Tesla is currently between two major growth waves,” Musk told investors Wednesday. The company is preparing to ship a new iteration of its driver-assistance system, he said, and is making progress toward its next vehicle.

Wall Street observers expected better news out of the earnings call. Dan Ives, a tech analyst with Wedbush Securities, said executives failed to address short-term concerns, even though he remains sold on the company’s long-term value.

“We were dead wrong expecting Musk and team to step up like adults in the room on the call and give a strategic and financial overview of the ongoing price cuts, margin structure and fluctuating demand. … instead we got a high-level Tesla long-term view with another train wreck conference call,” Ives wrote Thursday.

The company’s falling margins and “constant never-ending price cuts” are concerns, Ives wrote.

Gene Munster, managing partner of Deepwater Asset Management, said the company’s outlook gave investors pause.

“This was the most sobering guidance I’ve seen from Tesla,” he said.

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Musk also faced questions about his public demand for 25 percent of the company’s voting shares. Musk said Wednesday he wants the power to resist activist investors who may have “strange ideas” about how to run Tesla.

“I don’t want to control it, but if I have so little influence over the company at that stage, I could sort of be booted out by some random shareholder advisory firm,” Musk said.

Tesla laid out other plans for 2024 on the call, including rolling out the latest version of its Full Self-Driving Beta software, the company’s advanced driver-assistance system, to around 400,000 users.

But the company has faced new challenges with regulators when it comes to its driver-assistance software, Autopilot, which can maneuver its vehicles from highway on-ramp to off-ramp, maintaining a set distance and speed and even making lane changes. Full Self-Driving brings those capabilities to surface streets, allowing the vehicles to navigate from point to point, following road signs and making turns. Drivers must pay full attention at all times while using the software.

Tesla agreed last month to recall 2 million vehicles, nearly every car it has produced, over concerns that Autopilot did not adequately safeguard against driver misuse. The recall, conducted via a remote update, followed a series of meetings with regulators in late 2023 amid a larger investigation into Autopilot.

Days before the recall was announced, The Washington Post published an investigation identifying at least eight fatal or serious crashes involving Autopilot in locations where the software was not intended to be used.

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