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Thursday, June 20, 2024

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Market Reacts: Tesla Stock Closes Down 12% After Company Issues Warning on Production

On Thursday, Tesla stock experienced a decline following the company’s earnings report, which fell short of expectations and included a cautionary note about a potential slowdown in 2024.

The electric car manufacturer highlighted the possibility of “notably lower” growth in vehicle volume for the current year compared to the previous year. Compounding the pressure on Tesla’s stock, several brokers lowered their price targets for the company.

On Thursday, Tesla witnessed a significant 12% decline in its shares, marking its most substantial drop in over a year. This downturn followed the company’s earnings report from the previous day, which not only failed to meet market expectations but also included a warning of an impending slowdown in 2024.

Throughout the majority of the day, Tesla’s stock seemed poised for its most significant decline since 2020, narrowly avoiding that distinction by the close of trading.

The earnings report revealed that Tesla fell short of market expectations in both revenue and earnings. Specifically, Tesla’s automotive revenue, a closely monitored metric, reached $21.6 billion in the fourth quarter of 2023, reflecting a mere 1% year-on-year increase.

However, the primary cause for concern revolves around Tesla’s future outlook. The electric car manufacturer indicated that the growth in vehicle volume for 2024 might be significantly lower than the rate observed in the previous year, attributing this to the ongoing efforts in launching its “next-generation vehicle” in Texas. Tesla further cautioned investors about being in a transitional phase, currently positioned between two major growth waves.

Those betting against the stock reaped substantial rewards, with short sellers earning over $2 billion on Tesla since the close of trading on Wednesday, as reported by financial analytics firm Ortex Media. The stock has now experienced a 27% decline for the year, following a more than doubling in value throughout 2023.

In 2023, Tesla successfully delivered 1.8 million cars. The company responded to heightened competition from Chinese players like BYD and traditional automakers by implementing price cuts in key markets across Europe and China. However, these reductions have taken a toll on Tesla’s profit margins.

Compounding the challenges, various brokers reduced their price targets for the company, with Barclays revising its target from $250 to $225. Commenting on the situation, Barclays analysts noted on Thursday, “Not as bad as feared, but a cloudy path ahead reinforces some downside risk for now.”

RBC analysts also adjusted their price target from $300 to $297, while Canaccord Genuity, in a note on Wednesday, announced a reduction in its price target from $267 to $234

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