Tesla's - In a surprising turn of events, Tesla's stock has plummeted by 25% in 2024, prompting investors to reevaluate their positions and consider taking their profits. The electric car giant, which experienced a remarkable doubling of its stock in 2023, now faces challenges that are casting doubt on its future growth and performance.
Tesla's recent earnings report, released on January 25, fell short of expectations, leading to a 10% drop in its stock value. Analysts have subsequently revised their price targets, signaling a growing concern among investors. One of the primary reasons behind this decline is Tesla's weak customer value proposition and CEO Elon Musk's shifting focus towards artificial intelligence and robotics.
The financial figures presented in Tesla's fourth-quarter report for 2023 paint a less-than-rosy picture. Despite a 3% increase in Q4 revenue to $25.17 billion compared to the same period in 2023, the company fell short of LSEG expectations by about $500 million. The Q4 operating margin took a hit, dropping to 8.2%, approximately half of the figure reported for the same period in 2023. While the Q4 net income reached $7.9 billion, more than doubling the amount from Q4 2023, a significant portion of this increase was attributed to a $5.9 billion "one-time noncash tax benefit."
Looking ahead to 2024, Tesla's projections for electric vehicle volume growth indicate a potential slowdown. The absence of a specific production target for the year is a departure from previous practices, and analysts predict only a 20% increase in deliveries compared to the 38% rise observed in 2023.
During Tesla's earnings conference call, Musk provided what some view as excuses for the company's performance. Musk attributed weak growth to being "between two growth curves," with the next phase expected in the second half of 2025. He also blamed low margins on high-interest rates, suggesting that lower rates could improve the company's profitability. Musk's acknowledgment of the challenges in predicting the success of the company's push into robotics further fueled skepticism among investors.
Competing in the robotics space, Tesla faces formidable rivals such as Boston Dynamics, Agility Robotics, Figure, Sanctuary, Apptronik, 1X, Fourier, and Unitree. Musk's optimism about shipping "Optimus units" in the near future raised eyebrows, with analysts questioning the feasibility of such predictions in uncharted territory.
Tesla's weak customer value proposition is another area of concern. With falling gasoline prices, high electric vehicle (EV) prices, long charging times, and range anxiety, Tesla finds itself at a disadvantage. The company's focus on the expensive Cybertruck rather than affordable EVs has contributed to its competitive struggles, especially against successful strategies employed by Chinese companies like BYD.
The Cybertruck, announced in November, has faced criticism for its design and features. Described as an "apocalypse-bunker-on-wheels" with an elevated body and a blunt front end resembling a battering ram, the Cybertruck's approval for sale in Europe seems unlikely. The design features, coupled with a price tag of $60,990, 53% above the initially promised amount, have led to questions about Tesla's decision-making.
While Tesla plans to introduce more affordable vehicles in the second half of 2025, Musk's distraction with ventures like the acquisition of Twitter (now X) and the pursuit of a Generative AI rival to OpenAI has raised concerns. Musk's desire to increase his stake in Tesla from 13% to 25% to turn the company into a leader in AI and robotics has left investors wondering about the future of the electric car company.
Analysts have responded to Tesla's challenges by revising their price targets, reflecting a lack of optimism about the company's prospects. Barclays, RBC, and Canaccord Genuity have all reduced their price targets, citing uncertainties and downside risks for Tesla in the near future.
As Tesla grapples with internal challenges, external pressures, and the evolving landscape of the electric vehicle market, investors face a critical decision. With the stock down 25% in 2024, the question remains: Is it time to take profits and reconsider the long-term viability of Tesla's growth story? Only time will tell how the electric car pioneer navigates these turbulent waters and whether investors will see a resurgence in confidence or a continued decline in value.