Tesla shares dropped by as much as 9.2% in early trading Thursday following a narrow miss in earnings estimates and a warning from the company about slower expansion in 2024. The electric vehicle giant, which spent 2023 cutting prices to boost sales, saw this strategy impact its profits.

Analysts express concern over Tesla’s growth trajectory. Seth Goldstein from Morningstar Research notes the improbability of Tesla achieving growth in 2024, citing limits to price-cut strategies.

“Tesla is signaling that the days of 50% or even 30% to 40% growth year-over-year is not going to happen in 2024,” Seth Goldstein said in an interview. “At a certain point, you can’t cut prices anymore.”

Tesla, deviating from its usual practice, refrained from setting specific targets for 2024. The company, aiming for 50% annual growth, fell short despite price reductions throughout 2023. Vehicle deliveries increased by 38%, but projections for this year are only around a 20% increase.

“While 2024 will be a challenging year, it is becoming increasingly apparent that 2025 will likely not be better, with continued pressure on growth and margins,” Toni Sacconaghi a Bernstein analyst wrote in a research note Thursday.

At 8:53 a.m. in New York, Tesla’s shares were down 9%. This drop, if consistent, marks Tesla’s largest in three months, wiping out nearly $60 billion in market value. Already, the stock had fallen 16% in early 2024, its worst start to a year.

Tesla reported a fourth-quarter earnings miss, with 71 cents a share against the expected 73 cents. Its revenue was $25.2 billion, short of the $25.9 billion Wall Street prediction.

CEO Elon Musk views these setbacks as temporary, pinning hopes on a cheaper, next-generation vehicle planned for production in Austin and Mexico, and another North American site. This move aims to attract mass-market buyers, with current Tesla EVs starting at around $39,000 in the US.

Musk acknowledges challenges in ramping up production for the new model but remains confident about its superiority in manufacturing technology.


Image Source: The Wall Street Journal