Tesla shares close to breaking support after margin squeeze

Still, fundamentally rated as a tech company, Tesla said its margins were the slimmest seen in two years. Top and bottom lines were marginally below expectations with earnings per share (EPS) of 85 cents on revenue of $23.30 billion. The Street anticipated EPS of 86 cents and revenue at $23.78bn.

Since January Tesla has cut its prices, first in China then in Europe and the US, in an attempt to spur demand and fend off rising competition. But as expected this had an impact on gross margins, which fell to 19.3%, lower than the 21.2% expected by analysts.

(Video Transcript)

Tesla shares down again

Shares of electric vehicle (EV) manufacturer Tesla are down again today, all-sessions on the IG platform, after an 8% drop yesterday following the release of the lowest quarterly gross margin seen of the company in two years.

Let's take a look at the earnings as they came out for the most recent quarter. Top and bottom lines are marginally below expectations. Earnings of $0.85 a share below the $0.86 expected. We've been looking for revenues of almost $23.8 billion, in fact it came through with a revenue of $23.3 billion.

Now, since January, Tesla has been cutting prices in China, Europe, the US in an attempt to bring about demand and fend off rising competition. But as expected, this has had an impact on gross margins, which were down to 19.3%, lower than the 21.2% expected by analysts.

Now, in the conference call on Twitter following the release, CEO Elon Musk said it was better to shift a large number of cars at lower margins and harvest that margin in the future, "as we perfect autonomy".

Investors also take the fact by Tesla's production forecast. Musk had earlier said two million vehicle deliveries were achievable, a number he didn't confirm yesterday evening. Instead he stood by the company's official target of 1.8 million deliveries.

Share price chart

Lets take a look at the share price chart. You remember actually looking in the context of where we are now, this stock at a record high of 415.78 back on the 4th November 2021. Here we are now down, testing this line of support at $164. Yesterday, we were down around 8% all-sessions on the IG platform.

Now, this isn't in the cash trading session yet. So at 14:30 this afternoon UK time we'll get the first trades on the US markets with a drop. We've got another near 2% slide in the session today ahead of the main trading day on Wall Street. And we're now very close to testing this line of support at 16402. If we break that it will then take us down to levels not seen since the 27th of January.

Remember that 115% rise in the beginning of the year, right the way through to the recent highs of $217? That now seems a long way off from where we are there at the moment.

Renault

Let me just quickly run to another company with an electric story to it. This is Renault.

I think part of the reason Renault has dropped today, down almost 7%, has been in the wake of that news about the electric vehicle side from Tesla.

The French carmaker says revenues are up 30% on a rebound in sales and higher prices. It's now bringing about electric versions of the Megane, Arkana and Austral. And the company is now entering into this fierce competition within the electric vehicle market.