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Tesla Shares Fall by 4.9 % – Why Has Carmaker Failed to Meet Sales Estimates?

Last Updated April 3, 2024 12:20 PM
Giuseppe Ciccomascolo
Last Updated April 3, 2024 12:20 PM

Key Takeaways

  • Tesla’s deliveries fell short of analyst estimates, marking the biggest miss in seven years
  • This resulted in a 4.9% stock drop, extending the 2024 decline to 33%.
  • Despite missing targets, Tesla remained the top electric car producer due to a steeper decline by BYD.

Tesla sales figures  for the first quarter of 2024 left Wall Street disappointed despite analysts previously lowered their estimates for vehicle deliveries. Tesla’s stock tumbled on the stock exchange and analysts responded unfavorably to the sales figures.

Some of them reduced  the carmaker’s target price and revised outlooks on the shares. But, despite that, Elon Musk’s company topped BYD leadership in electric vehicles production.

Deliveries Missed Expectations

Elon Musk‘s automotive company delivered only 386,810 vehicles in the initial three months of the year, marking the most significant deviation from Bloomberg’s average estimate  in the past seven years. This underperformance caused Tesla’s shares to drop by 4.9% on Tuesday in New York, extending its 2024 decline to 33%, making it the second-worst performer in the S&P 500 Index.

Numerous warning signs emerged during the quarter. Initially, Tesla cautioned  that its growth rate would be “noticeably lower” this year, attributing it to interest rate hikes that rendered its cars unaffordable for many consumers, despite price reductions. The company faced various disruptions at its plant near Berlin, while Musk’s provocative posts  on X platform deterred potential buyers. Moreover, the competition intensified in China’s EV market.

Despite these challenges, many anticipated Tesla to exceed its vehicle sales from the previous year. However, deliveries ultimately decreased by 8.5%.

Tesla attributed part of this decline to transitioning to an upgraded version of the Model 3 sedan, which, along with the Model Y sport utility vehicle, constituted 96% of deliveries in the quarter. The company also cited shipping delays related to the Red Sea blockade and a suspected arson attack that halted production in Germany for several days.

Nevertheless, Tesla produced 46,561 more cars than it delivered to customers in the quarter, marking one of the largest disparities in the company’s history.

Market Reaction And Pessimistic Outlook

As the quarter drew to a close, analysts swiftly revised  their forecasts for this Tesla‘s deliveries. Some experts on Wall Street were even prepared for Tesla’s first sales decline since the early stages of the pandemic.

Analysts expected Tesla to deliver around 449,080 vehicles in the quarter, a potential 7% drop from the previous quarter’s record-breaking sales. This would have needed to surpass the 422,875 vehicles delivered in the first quarter of 2023 to avoid a year-over-year decline for the first time since Q2 2020.

After disappointing sales news, Tesla’s stock  fell by 4.9%, leading to a 30% decline year-to-date, making it the S&P 500’s worst performer. However, following Tuesday’s trading, Humana replaced Tesla as the worst performer after a significant drop.

Analyst Gordon Johnson from GLJ Research predicts  Tesla’s stock could lose nearly 90% of its value. He maintains a sell recommendation with a target price of $23.53, far below its current price. Despite Tesla’s $558 billion market cap surpassing rivals Toyota and BYD combined, Tesla only sells about 16% as many vehicles. Johnson adjusted his estimate for Tesla‘s first-quarter deliveries from 417,500 to 406,500, well below the consensus projection of 462,200.

HSBC also adjusted  its Tesla price target to $138 from $143, maintaining a ‘reduce’ rating. The bank expressed concerns about the uncertain timing and commercialization of Tesla’s key projects like Dojo, Full Self-Driving (FSD), and Optimus. These projects are pivotal for Tesla’s valuation. But the bank believes their timelines are longer than what’s currently factored into Tesla’s stock price.

But Tesla Tops BYD

Despite the dismal outcomes, Musk’s company reclaimed the lead among electric car manufacturers, largely attributed to the simultaneous decline of BYD. In the first quarter of 2024, BYD experienced a 42% decrease in electric vehicle shipments, amounting to 300,114 units.

Both companies are grappling with the challenging state of the electric car market, which is witnessing a slowdown globally. This slowdown can be attributed to consumer hesitancy due to high prices and charging infrastructure concerns. But also to the cessation of government incentives and consequent reevaluation of manufacturing company plans.

Political uncertainties surrounding European and American elections, coupled with tensions in the Middle East and disruptions in distribution and supply chains due to the Red Sea blockade, further compound the challenges these companies face.

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