Tesla Stock (NASDAQ:TSLA)
The results of Tesla and what Elon Musk had to say about them have caused investors to become concerned about the status of the economy, which has resulted in a decline in stock prices throughout the automotive industry.
Investors were dissatisfied with Tesla’s first-quarter gross profit margins, which were revealed on Wednesday evening and came in below the 20% mark. During the results conference call for the company, Musk made approximately ten references to either high-interest rates, the affordability of vehicles, or the economy.
In a research that was released on Thursday, New Street Research analyst Pierre Ferragu stated that “the recession scenario is on.” “Demand remains above supply, but at the cost of a string of price cuts,” as a reaction to a sharp decrease in vehicle demand in China and multiple signals of weakness across the world, the market has experienced “a string of price cuts.”
Buy is the recommendation that Ferragu has given for Tesla stock (NASDAQ:TSLA). He revised his projection for the price, bringing it down from $320 to $300 per share.
Investors are aware that things are slowing down, but they don’t enjoy hearing it from the CEO of the world’s most valuable car manufacturer because it makes them uneasy. In addition, Musk forecasted “economic stormy weather” for approximately one year.
A prolonged period of weakness through the middle of the year 2024 is not at all what investors had hoped for. Another factor that is working against Tesla stock is the chance that the company would continue to lower prices in order to control demand.
At the middle of the trading day, a share’s price was $167.02, reflecting a loss of $13.58, or 7.5%. The S&P 500 (SPX -0.60%) and the Nasdaq Composite (COMP -0.80%) each saw a loss of 0.5%, with the S&P 500 experiencing a loss of 0.6%.
It would be the lowest final level for Tesla since January 30, when shares closed at $166.66 if the company finished the day at $167.02, which would be the lowest final level for the day. The stock price has now fallen for three days in a row, and it has lost more than 10% of its value since yesterday.
There is no way for an automobile manufacturer to take genuine pleasure in the misfortune of one of their rivals. Pricing and the economy are also factors that influence all of them.
The share prices of Ford Motor (NYSE:F) and General Motors (NYSE:GM) fell by 3.9% and 3.3%, respectively. The share price of Stellantis (NYSE:STLA) fell by 4.9%. In trading taking place outside of Germany, shares of Volkswagen (VOW. Germany) are currently down 2.1%. Even shares of Toyota Motor (NYSE:TM) have dropped by 1%.
While the Hang Seng Index in Hong Kong rose 0.1%, shares of the Chinese electric vehicle (EV) manufacturer BYD (1211. Hong Kong) dropped by 0.9%. Shares of electric vehicle (EV) start-up companies Lucid (NASDAQ:LCID) and Rivian Automotive (NASDAQ:RIVN) dropped by 4.0% and 5.5%, respectively.
It isn’t universally agreed upon that Tesla’s difficulties are due to the state of the economy. “I’m not buying management’s narrative that a weak economy is causing Tesla’s volume issues,” said Gary Black, co-founder of Future Fund Active ETF. “I’m not buying that the economy is the cause of Tesla’s volume issues.” His investment fund owns shares of Tesla.
He points the finger at the reduced prices. Customers are more likely to remain loyal to a business when they observe falling pricing, as this makes them anticipate even lower prices in the future. It’s possible that Tesla’s logic is flawed in that regard. Pricing is “causing consumers to wait for still lower prices,” according to Black’s statement.
It is a miniature version of the phenomena that crippled the economy of Japan for several decades after the bursting of that nation’s economic bubble in the 1990s. Shoppers were encouraged to delay their purchases as a result of falling prices, which forced businesses to lower their prices even further.
Investors will have to wait until GM and Ford announce their first-quarter results on April 25 and May 2, respectively, before they will get a clearer picture of how the state of the economy is affecting sales of automobiles. It’s possible that these two people have quite different perspectives on what’s going on.
Prepare yourself for earnings season to be fraught with uncertainty.
Featured Image: Unsplash @ Paul Steuber
Author Shariq Khan 
