Tesla (TSLA), the leading U.S. electric vehicle manufacturer, witnessed a significant drop in its stock on Thursday following disappointing fourth-quarter earnings and a less optimistic outlook for the future.
After releasing its fourth-quarter earnings report on Wednesday post-market close, Tesla reported revenue and earnings below estimates, along with a forecast of a “notably lower” growth rate in 2024. The stock price of the automaker plummeted by approximately 10% on Thursday, trading at approximately $187 per share.
In Q4, Tesla’s revenue saw a 3% year-over-year increase to $25.2 billion, with automotive revenue up 1% to $21.6 billion. Despite the growth, the total revenue fell short of the consensus estimate of $25.9 billion. Adjusted net income for Tesla was $2.5 billion or 71 cents per share, marking a 39% year-over-year decrease, missing the estimated 73 cents per share. The GAAP net income, boosted by a one-time $5.9 billion tax benefit, was $7.9 billion, up 115% year over year.
Higher operating expenses, up by 27% at $2.4 billion, contributed to the earnings dip. The increased spending was attributed to elevated costs for research and development initiatives and the introduction of the new Full Self-Driving (FSD) Beta V12 software. Tesla reported that 2023 witnessed the highest capital expenditures and R&D expenses in the company’s history.
Lower selling prices, aimed at boosting sales, and a 13% increase in total production with a 20% rise in deliveries to 484,507 vehicles in the quarter, significantly impacted Tesla’s margins. The operating margin dropped by 784 basis points to 8.2% in Q4.
For the full year, Tesla’s revenue increased by 19% to $96.8 billion, with automotive revenue climbing 15% to $82.4 billion. GAAP earnings were up 15% to $15 billion, while adjusted earnings dropped 23% to $10.9 billion. The operating margin for the year decreased by 758 basis points to 9.2%. Tesla’s production reached 1.846 billion vehicles, up 35%, and deliveries were at 1.809 billion, up 38%.
Investors and analysts expressed more concern about Tesla’s 2024 outlook than its 2023 results. Management highlighted that the growth rate in vehicle volume for 2024 might be significantly lower than that achieved in 2023, attributing it to ongoing work on the next-generation vehicle in Texas.
Despite several analysts downgrading Tesla based on the outlook, with Wells Fargo, TD Cowen, and Redburn Atlantic revising their targets lower, the consensus price target among analysts still hovers around $224. Tesla’s stock, with a price-to-earnings ratio of 67, appears to be in a holding position for now, as the current outlook doesn’t present it as an attractive buy.