Tesla shares fall, wiping $80 billion off market value after disappointing results

(CNN) — Tesla shares fell 12% after the market opened Thursday, wiping $80 billion off the company’s market value after it warned of slowing growth in electric vehicle sales and the threat of Chinese competition.

Tesla shares suffered their worst day in 21 months and closed at their lowest level since December 2022. Since the beginning of 2024, the company’s market capitalization has fallen by $210 billion.

In its earnings report Wednesday, the world’s most valuable automaker said its sales growth this year “may be markedly lower” than last year as it continues development of its “next generation” vehicle, likely a smaller model.

Even though Tesla reported a significant 38% increase in deliveries last year compared to 2022, Tesla had previously projected an annual growth rate of 50% on average over several years.

Tesla’s financial results for the latest quarter also disappointed, with adjusted earnings per share falling 40% from a year earlier and revenue, which rose 3% to more than $25 billion, missing forecasts.

It was the second straight quarter in which the company missed earnings expectations, following a string of better-than-expected results dating back to early 2021.

The share price doubled during 2023, but that gain came in the first half of the year, and Tesla shares are off to a weak start in 2024, falling 16% ahead of Wednesday’s earnings report. The stock is currently trading at its lowest level since April last year.

Thursday’s intraday losses were comparable to the unusually large one-day drop of 11.4% at the end of December 2022. At the time, investors were concerned about Tesla’s sales and profitability prospects, as well as the state of the American economy.

Tesla’s fourth-quarter earnings also showed earnings are under pressure. The company’s operating margin fell by nearly half, to 8.2%, compared with the same period in 2022, partly due to increased costs associated with the production of the Cybertruck pickup truck. The new model entered production at the end of 2023.

Dan Ives, an analyst at research firm Wedbush, said Tesla’s earnings announcement gave investors “minimal reaction” to the company’s earnings cut.

“We were completely wrong to expect Musk and his team to act like adults and provide strategic and financial insight into ongoing price declines, margin structures and fluctuating demand,” the company wrote in a post on Thursday.

Chinese threat

Tesla has been cutting prices for more than a year in an attempt to boost sales despite increasing competition from rivals in China.

China’s BYD overtook Tesla in the final three months of last year, selling more cars than Elon Musk’s automaker for the first time.

At a news conference Wednesday, Musk told analysts that Chinese automakers are “the most competitive auto companies in the world” and will “have significant success outside of China.”

“Frankly, I think if trade barriers aren’t put in place they will pretty much wipe out most of the other car companies in the world,” he said.

Growing competition from BYD and other Chinese automakers prompts investigation anti-dumping European officials, which could lead to higher duties on car imports from China. He dumping refers to the practice of exporting goods to a country at prices that do not reflect their value.

Interested in purchasing?

While Tesla’s earnings have been “disappointing and uncharacteristic,” Garrett Nelson, senior equity analyst at CFRA Research, expects the launch of a cheaper car in the coming years to be “the catalyst the stock needs,” he wrote in a note. Wednesday.

Ben Barringer, technology analyst at Quilter Cheviot, is also optimistic. He sees the broader economic situation starting to tip in Tesla’s favor.

“Interest rates will start to fall. “This would be a real positive for Tesla, as well as the auto sector as a whole, as consumers typically purchase their vehicles through financing,” he wrote in a note Thursday.

Chris Isidore contributed reporting.