As you may know, Tesla (NASDAQ:TSLA) stock was trending lower ahead of this week’s quarterly earnings release. But instead of shares surging back upon the unveiling of positive surprises/”less bad” results, the market reacted negatively to the company’s latest financials, and to updates to guidance provided by CEO Elon Musk.
Still, even as shares have experienced a post-earnings sell-off, and said sell-off could morph into a continued slide in the near-term, that’s not necessarily a reason to bail on this EV winner.As I’ll explain below, there is a path back to higher prices, based upon more positive news/developments also recently revealed.
TSLA Stock, Earnings, and a Double-Digit Sell-Off
On Jan. 24, Tesla announced earnings for the quarter ending Dec. 31, 2023. For the quarter, revenue came in at $25.1 billion, representing a 3% increase from the prior year’s quarter. Non-GAAP earnings per share came in at 71 cents, down 40% year-over-year.
These numbers came in slightly below sell-side forecasts, but that’s not the main reason TSLA stock tanked to the tune of 12.1% the first trading day following the earnings report. Rather, this double-digit sell-off resulted from discouraging guidance from CEO Musk.
As Barron’s reported Jan. 25, Musk stated that vehicle volume growth “may be notably lower” in 2024 compared to 2023. For reference, Tesla increased its vehicle delivery volume by 38% last year. Even as the market has expected a growth slowdown, Musk’s concurring rather than assuaging of growth concerns was not what the market wanted to hear.
Although there could be a silver lining (lower expectations about growth may mean Tesla feels less pressure to cut vehicle prices in order to meet delivery guidance), it’s still very possible that this slowdown in demand growth is coupled with further weakness with margins/profitability.
Stay Put, Even if Shares Stay on a Downward Trend
Admittedly, with TSLA stock sporting a rich forward earnings multiple (54.8). It goes without saying that the prospect of slowing growth is not a good sign. As you know, while the market may pay up for growth, it’s apt to punish growth stocks that enter a slowdown period.
With this in mind, I wouldn’t rule out the possibility that the TSLA slide carries on. The extent of the potential share decline is uncertain. Positives such as the expected lowering of interest rates later this year could help soften the blow.
Instead of making a full retreat to the stock’s late 2022 multi-year low (a little over $100 per share), a move back down to $150 or $125 per share. Yet while even this price forecast suggests that the best course of action is to sell/avoid now, this may not fully be the case.
Sure, if you’ve yet to buy, taking your time is likely a wise move. If you currently own TSLA, however, the catalysts I hinted at above (including one connected to interest rates) should give you good reason to stay put in your positions.
This EV Winner is Primed to Electrify Once Again
Similar to what played out between late 2022 and early 2023, between now and later this year, Tesla could go back to full charge once again. If interest rates do indeed start coming down, that’s great news for the company, not just the stock.
Lower rates could help fuel a rebound in EV demand growth. Along with his downbeat remarks about 2024, Musk also hinted that a growth re-acceleration could kick off starting in 2025.
According to a Reuters exclusive, 2025 may also be the year Tesla launches its much-awaited mass market EV model. The launch of this vehicle, for now codenamed “Redwood,” could help the company get back into high-growth mode.
With such promising potential catalysts on the horizon, when it comes to TSLA stock, hold onto existing positions, and seize any opportunity to enter/increase a position.
TSLA stock earns a B rating in Portfolio Grader.
On the date of publication, Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
