Tesla's Stock Plummets Over 6% Following Disappointing Q3 Results


Shares of Tesla, the pioneering electric vehicle manufacturer, experienced a sharp decline of more than 6% on Thursday, a day subsequent to the release of their third-quarter financial results, which failed to meet market expectations.

Tesla disclosed a revenue of $23.35 billion, accompanied by adjusted earnings of 66 cents per share, both of which fell short of Wall Street's projections. This marks the first instance since the second quarter of 2019 that Tesla has fallen below estimates in both earnings and revenue.

During the quarterly call with investors, CEO Elon Musk delivered a pessimistic evaluation of the global economic landscape, expressing apprehensions about the prevailing high interest rates, asserting that they pose a barrier for consumers looking to make car purchases.

Musk emphasized Tesla's commitment to reducing the costs of its vehicles, prioritizing this effort before fully engaging in the establishment of a new factory in Mexico. He stressed, "We have to make our products more affordable so people can buy it," during the call.

Bank of America analysts reiterated their neutral rating on Tesla's stock, while revising down their forecasts for the company's fourth quarter and beyond due to a "lower gross margin profile." They also noted their surprise at Musk's extended discussion on the global economy.

In a note issued on Thursday, Bank of America analysts remarked, "Interestingly, Elon Musk (CEO) dedicated a large amount of time to the broader macro environment and the effects of currently high interest rates."

Similarly, analysts from Morgan Stanley commented that despite Tesla's disappointing Q3 results, it was the "cautious commentary" on the economy that primarily influenced the immediate stock reaction.

"In our opinion, 3Q23 was one of the most cautious Tesla conference calls we’ve heard in years," stated the Morgan Stanley analysts. They also expressed a valid concern regarding interest rates, but questioned the extent to which Tesla's caution stems from competition or a potential slowdown in demand.

Within the investor call, Musk sought to "temper expectations for Cybertruck," highlighting that it will take a year or longer before the vehicle becomes a "significant positive cash flow contributor."

Musk's remarks raised red flags for analysts at Deutsche Bank, who expressed ongoing concerns about Tesla's growth projections for 2024.

"Tesla’s 3Q earnings miss and cautious forward-looking comments around vehicle demand, 2024 growth outlook, slow and expensive ramp of Cybertruck, and uncertain timeline of next-gen platform, reinforce our published concerns on the company’s challenging fundamentals heading into next year," noted the Deutsche Bank analysts in a statement on Thursday.