Tesla (TSLA) shares fell 9.75% on Thursday, the lowest since late January, as the electric car maker reported gross margins below 20% for the first time in nearly three years.
Wall Street analysts reacted to yesterday’s EV giant’s earnings report, which saw profits fall to $2.5 billion from $3.3 billion a year ago, raising concerns about margin pressures and lowering many estimates. rice field.
The pressure comes after Tesla cut prices six times this year to reinvigorate demand, two of them coming this month in the EV maker’s second quarter.
When asked about how low Tesla’s profit margins could be, Tesla CEO Elon Musk said, “It’s hard to say what the profit margins will be.”
The reaction on Wall Street was swift. Jefferies maintained its buy rating on Tesla, but the bank cut its price target from $250 to $230, citing shrinking margins for the company as a major concern.
“The first quarter didn’t put a lot of faith in price elasticity or the floor of gross margins that prioritized volume over short-term profitability,” Jeffries wrote in a note to clients. I’m here.
Tesla has ramped up production and deliveries of electric vehicles over the past few quarters, generating near-record earnings, but production is outstripping demand. The company said it delivered 422,875 units in the first quarter and produced 440,808 units.
Ronald Jusikou, vice president of automotive equity research at Guggenheim Securities, told Yahoo Finance Live after Wednesday’s report. “They have a lot of supplies they need to find a home. The only way they really have is to bring the price down.”
Wedbush’s Dan Ives, a longtime Tesla bull, also lowered his price target from $225 to $215 a share on the back of tighter margins.
“Musk & Co. has slashed prices to further stimulate consumer demand amid macro volatility as EV competition intensifies globally in this EV arms race,” Ives told customers after the release. wrote in a note to “No rose-tinted glasses: Profit margins are now a sensitive issue, and Tesla investors can’t sleep at night.”
For the entire first quarter, Tesla reported revenue of $23.33 billion. That’s just short of Street’s estimate of his $23.35 billion, with adjusted earnings per share at his $0.85, below his estimate of $0.86. Tesla’s net profit was $2.9 billion, down $700 million from the same period last year.
On the positive side, Elon Musk said on the earnings call that the company aims to hold a Cybertruck “delivery event” at the end of the third quarter.
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