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“Hoist(ed) by its own petard,” say Tesla bears. And, after yesterday’s bleak earnings release and a disastrous earnings call, the bears are out in full force today for their victory lap.
Translation to plain English:
Tesla’s stock (TSLA) rose by 1.4%. However, they fell short in their third-quarter adjusted earnings per share, reporting $0.66 compared to the expected $0.72. Their automotive gross margin, excluding regulatory credits, was 16.1%, whereas 17.7% was…
— Annonymous Programmer (@unnamed_coder) October 18, 2023
There was quite a lot to digest yesterday. Tesla failed to meet consensus analyst expectations regarding its top-line and bottom-line metrics, hammered by a steep drop in its auto gross margin (ex-Regulatory Credits), which declined from 26.7 percent in Q3 2022 to just 16.3 percent in Q3 2023. Given the deep additional price cuts that Tesla has instituted in several key markets this quarter, such a decline is only logical.
Surprisingly, while Tesla’s ex-RC Average Selling Price (ASP) fell by 18.1 percent on an annual basis, the company’s Cost of Goods Sold (COGS) metric for its auto stores decreased by just 4.8 percent.
Most people I spoke with tonight thought the $TSLA earnings call was not good to terrible. Lot of excuses about macro, new CFO seemed unsure, no answer to question have auto gross margins bottomed, $25K car should be highest priority, didn’t address the question why not buy down…
— Gary Black (@garyblack00) October 19, 2023
Nonetheless, it was the earnings call, beset by a still-green CFO and a somewhat paranoid CEO, that unleashed the true horror for Tesla bulls. The new CFO, Vaibhav Taneja, could provide no visibility on whether Tesla’s auto gross margin (ex-RC) has, in fact, hit a cyclical nadir. Taneja also could not answer why the EV giant was not focusing on subsidizing its car loans to address the weak consumer affordability metric and, instead, was glued to the margin-destroying price discounts.
“We dug our own grave with Cybertruck,” $TSLA @elonmusk told analysts, referring to the level of complexity of the vehicle. “Special products that come along only once in a long while are just incredibly difficult to bring to market, to reach volume, to be prosperous.”
— notreload (@thudderwicks) October 19, 2023
Of course, Elon Musk stole the proverbial limelight when he pronounced:
“We dug our own grave with Cybertruck.”
Musk spent a fair amount of time tempering expectations regarding the latest addition to Tesla’s product portfolio, noting that the company would probably be able to attain a volume production level of 250K Cybertrucks per year only by 2025. On the bright side, there are now over a million reservations for the Cybertruck. Elon Musk also hinted at “slow-walking” Tesla’s newest factory in Mexico until the macroeconomic background improved.
🔸 $TSLA down 4.9% premkt$TSLA: Wedbush cuts target price to $310 from $350 $TSLA: Morgan Stanley cuts target price to $380 from $400 $TSLA: Canaccord cuts target price to $267 from $293 $TSLA: Citi cuts target price to $255 from $271 $TSLA: Goldman Sachs cuts target price…
— *Walter Bloomberg (@DeItaone) October 19, 2023
For Tesla, the reckoning for yesterday’s events has come swiftly, with Goldman Sachs, Morgan Stanley, Citi, and Wedbush all slashing their target for the company’s stock price.
Bernstein’s longstanding Underperform rating is based on their view that $TSLA “is a car company” more than a tech company — and the car industry “will not allow volume participants to have sustained outsized margins.” https://t.co/lzIgsDdlTv
— Carl Quintanilla (@carlquintanilla) October 19, 2023
No one on Wall Street, however, can match the scathing comments by Bernstein analysts, who now increasingly view Tesla as a run-of-the-mill auto company operating in an industry that does not allow “volume participants to have sustained outsized margins.”
Tesla shares are currently down over 6 percent in pre-market trading.