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Tesla Stock Dips on Shrinking Margins and Cybertruck Worries

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Tesla Stock Drops as Investors React to Imprecise Commentary

Shares Fall Following CEO Elon Musk's Comments on Cybertruck and Robotaxi-Ready Car

Shares of electric automaker Tesla fell by over 4% in pre-market trading on Thursday. This drop comes after investors reacted negatively to imprecise commentary from CEO Elon Musk and other executives regarding the company's latest vehicle, Cybertruck, and a planned robotaxi-ready car. Musk also mentioned that Tesla's Q3 production will be slightly down due to summer shutdowns for factory upgrades. Analysts have expressed concerns about Tesla's margin "headwinds," which hit a five-quarter low at 9.6%. Goldman Sachs analyst Mark Delaney believes Tesla may face margin challenges in the intermediate term if they lower prices to support higher volumes.

Investor Concerns Over Margin and Delivery Volumes

Tesla's margin of 9.6% for the quarter ending June 30, 2023, has raised concerns among investors. Analysts worry that if Tesla reduces prices to increase sales volume, the company could face margin headwinds in the near future. Tesla has not provided specific delivery volumes for the new Cybertruck, leading to uncertainty among investors. Though the company reported 466,140 total vehicle deliveries for the second quarter, CEO Elon Musk only mentioned the Cybertruck would be produced in high volume next year, with an unknown quantity being delivered in 2023.

Depressed Stock Price Despite Positive Earnings Report

Tesla's stock price has seen a slight recovery from its overnight lows but remains lower compared to Wednesday's closing price of $291.26. Tesla reported revenue of $24.93 billion and earnings of 91 cents per share for the quarter, beating expectations. However, investors' reaction to Musk's comments and concerns over margins have impacted the stock's performance.

The Future of Tesla and Cybertruck Production

Tesla reassured investors during its earnings presentation that Cybertruck "factory tooling" is on track. However, the company is currently producing "release candidate" builds. It remains to be seen how Tesla's production and delivery volumes for the Cybertruck will impact the company's future performance.

Conclusion: Imprecise Commentary Puts Pressure on Tesla's Growth Potential

The recent drop in Tesla's stock price, fueled by investor reaction to CEO Elon Musk's imprecise commentary, highlights the challenges faced by the electric automaker. With concerns over margin headwinds and uncertain delivery volumes, Tesla's ability to sustain its growth trajectory is being closely scrutinized.

Analysts have expressed worries that if Tesla lowers prices to stimulate sales volume, the company could face further margin challenges in the near future. This could hinder Tesla's profitability, especially as its margin has already hit a five-quarter low. The pressure on margins could be amplified if the company's highly anticipated Cybertruck fails to deliver significant sales volumes, as specific delivery figures have not been provided.

Despite reporting positive earnings, beating expectations with impressive revenue and earnings, the stock price of Tesla remains depressed. The combination of Elon Musk's imprecise commentary and investor concerns over margins has overshadowed the strong financial performance.

Looking ahead, Tesla's production and delivery volumes for the Cybertruck will play a pivotal role in the company's future. While reassuring investors that the "factory tooling" for the Cybertruck is on track, Tesla's current production of "release candidate" builds raises questions about the timeline and potential impact on the company's performance.

In conclusion, the recent stock drop and investor reaction emphasize the need for clarity and precision in Tesla's communication. The uncertainties surrounding margin pressures, delivery volumes, and the successful launch of the Cybertruck create challenges for the company's growth potential. Aspiring businesses in the electric vehicle industry should take note of the importance of clear communication, accurate projections, and managing investor expectations to ensure steady growth and avoid unnecessary market volatility.

Article First Published at: https://www.cnbc.com/2023/07/20/tesla-stock-falls-on-slim-margins-cybertruck-concerns.html

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