Tesla fell from the "altar" and became an ordinary car company? Tesla's third-quarter performance fell short of expectations, and Musk's cautious stance triggered concerns on Wall Street that its valuation would be unsustainable. Some analysts even believe that Tesla has fallen from the "altar" and is becoming more and more like an ordinary car company.
Bank of America, Ganacor, Goldman Sachs, Morgan Stanley and other major banks have lowered Tesla's target price due to the third quarter financial report. At the same time, some analysts predict that Tesla's delivery volume in 2024 may be lower than consensus and profit margins will be lower than expected.
After the U.S. stock market closed on Wednesday, Tesla released its third-quarter results. For the first time since the second quarter of 2019, both revenue and profit were lower than expected. Gross profit margin has continued to decline for three consecutive quarters. Its core automobile sales business profit margin has plummeted to its lowest point in more than four years, compressing to a level close to that of its competitors General Motors and Ford. At the same time, Musk cautiously talked about being worried about the high interest rate environment. If interest rates remain high or even higher, it will be much more difficult for people to buy cars.
This has sparked concerns on Wall Street about whether Tesla's price-cutting strategy is effective and whether its "growth story" can continue. Tesla's stock price plunged more than 9% on Thursday, and its market value shrank by US$70 billion, the largest decline in two months. Before the release of the financial report, Tesla's stock price soared 80% this year, making it one of the stocks with the largest increase in the S&P 500.
Third-quarter results fell short of expectations, Wall Street cut valuations
Bank of America, Ganaco and Goldman Sachs all lowered their target prices on Tesla earlier Thursday.
Bernstein analyst Toni Sacconaghi noted:
To justify Tesla's stock price, investors must believe it can achieve very high sales and profit margins, similar to a technology or software company rather than a traditional car company.
At present, Tesla is becoming more and more like an ordinary car company. Tesla's delivery volume in 2024 may be lower than consensus and profit margins will be lower than expected.
Some analysts pointed out that Tesla’s price cuts aimed at stimulating demand did not work as expected. JPMorgan analyst Ryan Brinkman said:
Tesla had to take these price cuts, but vehicle sales were lower than analysts had expected. This time last year, before the price cuts, Wall Street expected 2023 vehicle deliveries to be about 2 million vehicles. Now that number has dropped to 1.8 million vehicles, Tesla's valuation is looking increasingly unsustainable.
Even analysts who have always been optimistic about Tesla are no exception. Wedbush analyst DanIves, who has been optimistic about Tesla for a long time, said:
The earnings call was a "mini-disaster," with Musk taking a cautious approach, warning that Cybertruck production would take time and that he was worried about the current economic climate.
Ives lowered his price target on Tesla stock to $310 from $350, citing near-term challenges with margins and production.
Adam Jonas, the “favorite” Tesla analyst and chief automotive analyst at Morgan Stanley, defended Tesla:
Optimistic about Tesla's fully autonomous driving supercomputer, Tesla is much more than a car company. Tesla's network services, third-party batteries and fully autonomous driving licenses, as well as energy and insurance businesses, these business lines will become greater profit drivers.
Despite this, Morgan Stanley lowered its Tesla target price from $400 to $380.