Tesla Shares Witness Steep 12% Decline Following Earnings Report

Tesla, the electric car giant, experienced a significant setback as its shares closed down 12% on Thursday, marking the most substantial decline in over a year. This sharp drop followed the company's latest earnings report, which not only failed to meet market expectations but also raised concerns about a potential slowdown in 2024.

In its Q4 2023 report, Tesla reported automotive revenue of $21.6 billion, reflecting a mere 1% year-on-year increase. However, the primary cause for investor apprehension lies in Tesla's outlook for the upcoming year. The company warned that the growth in vehicle volume for 2024 might be significantly lower than the previous year, attributing it to the focus on launching its "next-generation vehicle" in Texas. Tesla emphasized being "currently between two major growth waves."

Short sellers, anticipating Tesla's challenges, capitalized on the stock's decline, reaping profits exceeding $2 billion since Wednesday's close, as reported by financial analytics firm Ortex Media. With this decline, Tesla's stock has now fallen by 27% year-to-date, a notable shift from its remarkable doubling in value throughout 2023.

Tesla delivered 1.8 million cars in the previous year, facing intensified competition globally from Chinese players like BYD and traditional automakers. The company responded by implementing price cuts in key markets across Europe and China, impacting its margin. Additionally, various brokers adjusted their price targets for Tesla, with Barclays, for instance, lowering its target from $250 to $225.

Commenting on the situation, Barclays analysts noted, "Not as bad as feared, but a cloudy path ahead reinforces some downside risk for now." Similarly, RBC analysts and Canaccord Genuity have also revised their price targets in response to Tesla's challenges.