Tesla (NASDAQ:TSLA) stock fell 8% overnight as investors digested lower margins and light earnings.
Shares in the electric vehicle giant traded at about $167/share early this morning, April 20, down from $183 early on April 19. That’s a $50 billion loss of market capitalization in about 24 hours.
For the quarter ending in March, Tesla earned $2.5 billion, 73 cents/share under GAAP, on revenue of $23.3 billion. This was down from the $3.07 billion of earnings, $1.07/share, and revenue of $24.3 billion last quarter.
Falling Margins
Margins are falling as Tesla cuts prices to move inventory.
Tesla’s Model 3 now starts at less than $40,000, against $47,000 in December. Tesla has also been cutting prices for using its Superchargers.
This is squeezing rivals just as they begin producing in quantity. But it’s also squeezing Tesla. The company produced 440,000 cars in the first quarter but delivered 423,000.
Worse, Tesla may be losing its lead in batteries. Its chief battery supplier is CATL (OTCMKTS:PCRFY). The Chinese company also supplies rivals like Volkswagen (OTCMKTS:VWAGY) and is building a $3.5 billion plant in Michigan for Ford Motor (NYSE:F).
Tesla told analysts last month it has plans to eventually make 20 million cars per year, showing off a deep executive team and talking up both a new plant and a new car platform in Mexico. But the price cuts have analysts wondering, for the first time, whether there will be demand. CEO Elon Musk insists the company can sell its cars with no margin and still generate profit from charging and service.
TSLA Stock: What Happens Next?
There are still Tesla bulls out there. But margins are falling, and competition is increasing. Mid-market companies like BYD (OTCMKTS:BYDDF) are out-selling it in China. The Biden administration is also supporting American rivals like Ford and General Motors (NYSE:GM). This makes it harder to justify paying 50 times earnings or five times revenue for the stock.
On the date of publication, Dana Blankenhorn held no positions in any company mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
