04/25/2024 – 0:45
Tesla investors returned after CEO Elon Musk said the company would accelerate the rollout of more affordable electric vehicles in hopes of boosting dwindling profits.
Tesla shares rose 12% on Wednesday (24), after a year-long skid that dropped the share price by more than 40%.
Musk's announcement appeared to calm nervous investors on Wall Street who were still trying to digest the company's most recent earnings report, released on Tuesday, which showed that profit fell to the lowest level in any three-month period since 2021.
Dan Ives, senior analyst at Wedbush Securities, said Tesla and Musk “are facing a Category 5 storm after a Cinderella ride over the past few years.”
But Ives added that he maintains an “optimistic investment thesis” thanks to what he predicts will be a “Model 2.5” – a lower-cost Tesla that Musk indicated could hit the streets early next year in a conference call with analysts.
Ives said the low-cost EV will be “key to Tesla’s volume recovery in 2025.”
Musk declined to provide details on the most affordable models and instead spent much of the profits on Tesla's efforts to diversify its business into AI, humanoid robots and operating a fleet of autonomous vehicles – all based on software products. and hardware that have not yet been fully developed. developed.
Several other analysts interpreted Musk's remarks that his cheaper models would be built using current platforms and production lines as a sign that he had given up on more ambitious plans for an all-new model expected to cost $25,000. .
“We read 'more affordable' as potentially disgruntled Model Y/Model 3 versions, with improvements in software and AI/hardware capability, but at lower prices,” said Morgan Stanley analyst Adam Jonas.
Tesla's newly formulated plans helped Wall Street ignore the company's weak first-quarter results. Despite Wednesday's jump, shares have plunged 35% since Jan. 1 as high borrowing costs have dampened demand for electric vehicles and a price war in key market China has intensified. Shares closed Wednesday at $162.13.
The company reiterated this week that it predicts growth in 2024 will be “notably lower” than the previous year.
The electric vehicle pioneer said its first-quarter revenue fell 9% to $21.30 billion from $23.33 billion last year — the biggest decline since 2012. Analysts had expected the company to report revenue of $22.15.
In the fourth quarter of last year, Tesla reported revenue of $25.17 billion.
Tesla's operating margin also shrank considerably in the first quarter — from 11.4% last year to just 5.5% in the first three months of this year.
Tesla reported net profit of US$1.1 billion in the period between January and March – a 55% drop compared to the same period last year.
Earlier this month, Tesla reported a sharp 8.5% drop in the number of deliveries in the first quarter.
“The first impression for us is that CEO Elon Musk is appeasing the market by accelerating the launch of new products,” Jefferies analysts led by Philippe Houchois said in a note.
Tesla's growth strategy could bolster support for May's shareholder vote on Musk's $56 billion compensation package, which was overturned by a Delaware court in January.
Some Tesla investors — such as Ross Gerber, chairman and CEO of Gerber Kawasaki Wealth & Investment Management — said in recent days that they planned to oppose the package, citing a decline in Tesla's share price and a compromised board.
Musk had already said that he intended to launch the Model 2, a low-cost option that would cost around US$25,000.
Last month, a Reuters report indicated that Musk ordered his lieutenants at the company to abandon plans for an affordable option and focus on developing autonomous robotaxis. But the CEO denied the report, claiming that Reuters was “lying”.
The news agency responded by saying it stood by its reporting.
On Tuesday, neither Tesla nor Musk directly addressed the Reuters report.
Instead, they discussed unidentified new models that appeared to be different products, without saying how many, what type or giving their target prices.
The new models would be built on Tesla's current manufacturing lines and would use “aspects” of its current platform and a next-generation platform, Tesla said.
It warned that this plan could “result in achieving less cost savings than previously expected,” suggesting that the vehicles could cost consumers more than the Model 2's anticipated $25,000 price tag.
Tesla has been in crisis over the past year due to intense competition from Chinese companies such as Warren Buffett-backed BYD, as well as a drop in demand for electric vehicles that has hurt its financial results.
Two senior company executives announced earlier this month that they would leave.
Another, Martin Viecha, Tesla's head of investor relations, said at the end of Tuesday's earnings call that he would also step down from his role.
Last week, the company said it would halt deliveries of all Cybertrucks after drivers complained of a potentially fatal accelerator pedal failure.
The electric vehicle maker also announced that it has reduced prices in several of its key markets, including China and Germany.
Over the weekend, Tesla slashed the price of its Full Self-Driving driver assistant software to $8,000 from $12,000 in the US.
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