Tesla shares down 7% on slowest growth in three years

On an adjusted basis, Tesla earned 71 cents per share in the fourth quarter, missing an average estimate from analysts at 73 cents on a 3% climb in revenue to $25.17 billion, also lower than expected. The reason? It said it was in between two growth waves. The group saw the first wave driven by the release of Models 3 and Y in 2017 and 2020, while it said the second wave wont start until the next-generation vehicle platform. Hence the warning of "notably lower" sales growth this year. Margins were also a concern for investors, as throughout the year, Tesla has been cutting its vehicle prices. Tesla reported a gross margin of 17.6% for the three months ended December, compared with 23.8% a year earlier. Analysts' average estimate was of 18.3%.

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Tesla shares

Yesterday, the value of Tesla's shares decreased by nearly 7%, this happened because the company announced that its earnings and sales were lower than expected. This news caught investors off guard and made them worried about their investment. In the last quarter, Tesla made 71 cents per share, which was slightly below the average prediction of 73 cents by analysts. Also, the company's revenue only grew by 3% to $25.17 billion, which is the slowest rate of growth in over three years. All of these numbers were lower than what the company had anticipated.

The Model 3 and Model Y

Tesla explained that it's currently going through a transition between two growth periods. The first period was from 2017 to 2020 when they released the Model 3 and Model Y, which led to strong growth. However, they are now moving into the second period, where they will introduce a new vehicle platform. This shift is causing Tesla to expect lower sales growth this year. The production of their new generation vehicle in Texas will start in the second half of 2025.

Investors have been worried about Tesla's profit margins because the company has been reducing vehicle prices. In the last three months of 2024, Tesla's profit margin was 17.6%, down from 23.8% in the same period the previous year. This drop was also below analyst expectations. The reason behind this decrease in profit margin is the Chinese electric vehicle manufacturer producing vehicles at a much lower price. Tesla's CEO, Elon Musk, mentioned that this trend will continue unless there are restrictions on Chinese imports competing with Tesla at lower price points.

Tesla's poor earnings

The stock price fell below the support line, reaching levels not seen since October 31, 2023. In summary, Tesla's poor earnings, lower-than-expected sales, and anticipated slower growth have led to a decrease in their stock value. The company's profit margin has also been affected by lower-priced competition from Chinese electric vehicle manufacturers.