Tesla’s (NASDAQ:TSLA) fourth-quarter earnings, released on Wednesday, stirred conversations within the financial world as the numbers were perceived to fall below “consensus expectations.” However, the larger context reveals that Tesla has been on a downward trend since November 2021, influenced by shifting dynamics in global supply and demand and increased competition in the electric vehicle (EV) market.
While Tesla’s Q4 earnings per share (EPS) of $0.71 and revenue of $25.17 billion were slightly below expectations of $0.74 and $25.6 billion, respectively, the market reaction was significant. The stock saw a nearly 10% drop, reaching approximately $187.00 in the aftermath of the earnings release.
It’s essential to approach the evaluation of Tesla’s performance beyond the narrow scope of “consensus expectations.” Such measurements can often be arbitrary and fail to capture the broader market dynamics. Comparing investor responses to earnings reports, the article highlights the distinction between traders, who react swiftly to headlines, and investors, who take a long-term view considering factors like innovation, growth potential, and industry evolution.
Examining Tesla’s historical performance, the article notes that despite surpassing “consensus estimates” in quarterly earnings from Q4 2021 through Q4 2022, the stock lost 68% of its value from the end of November 2021 to December 2022. The author attributes this to the fundamental economic principle of supply and demand. By the end of 2021, Tesla faced increased competition in the EV market, particularly from Chinese car makers.
Elon Musk acknowledged the growing competitiveness of Chinese car companies during recent earnings announcements, stating that they are the most competitive globally. The mention of potential tariffs and trade barriers in Musk’s remarks adds an intriguing layer to the discussion, given Tesla’s efforts to remain competitive by adjusting prices.
The article underscores the significance of supply and demand dynamics, emphasizing that as the global supply of electric vehicles increased to meet demand, prices per unit declined. This shift is identified as a primary reason for Tesla’s decline by the end of 2023.
For analysts adopting a technical perspective, the article points to key price levels to watch, including the previous low monthly close of $164.31 (April 2023) and the long-term low of $123.18 (December 2022). These levels, if breached, could provide insights into the market’s long-term sentiment toward Tesla.
In conclusion, the article challenges the fixation on short-term metrics and encourages a broader understanding of the market forces influencing Tesla’s performance. It also hints at the continuous evolution of the electric vehicle industry, debunking notions that it may be waning in significance.
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