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Tesla Shares Drop Before Earnings Announcement

Tesla, plunging by almost 30% as the EV powerhouse battled growth hurdles amid stiff competition from Chinese rivals
April 24, 2024

Tesla, the electric vehicle (EV) giant, faced a tumultuous first quarter in 2024, experiencing a nearly 30% decline in its shares due to growth bottlenecks and increasing competition. As the company prepares to announce its first-quarter earnings, analysts are revising down their estimates, anticipating further deceleration in revenue growth and net income. However, this downward trend might present an opportunity for a rebound, should Tesla surprise with better-than-expected results.

In the first quarter of 2024, Tesla struggled with various challenges, resulting in a disappointing performance. EV deliveries fell short of expectations, with a total of 368,810, marking an 8.5% decrease compared to the same quarter last year. Production also experienced a significant slowdown, dropping by 12.5% from the previous quarter to 433,371 units. Factors contributing to this deceleration included the temporary closure of Tesla's German factory and shipment disruptions caused by external factors.

Tesla faced intensified competition in China, its largest market outside the U.S., with sales contributing to approximately 22% of its total revenue. Chinese rivals, particularly BYD and Xiaomi, posed significant challenges, eroding Tesla's market share. However, despite initial setbacks, Tesla managed to regain its lead over BYD in the first quarter of 2024.

In the fourth quarter of 2023, Tesla experienced a modest revenue growth of only 3% compared to the previous year. The operating margin also decreased to 8.2%, nearly halved from the fourth quarter of 2022. Although Tesla's net income doubled, excluding a one-time non-cash tax benefit, its earnings per share fell by about 39% year over year.

Tesla's Cybertruck emerged as a focal point for growth in 2024, with the company aiming to produce over 125,000 units annually. However, CEO Elon Musk hinted at potential delays in production due to the model's manufacturing complexity.

Various financial institutions project a further deceleration in Tesla's revenue growth and net income for the first quarter of 2024. Analysts estimate Tesla's first-quarter revenue to be around $23.13 billion, representing a flat growth year over year.

Despite challenges, Tesla's share prices stabilized after an initial sharp decline following the disappointing delivery figures. This suggests that investors may have already factored in the slowdown in Tesla's sales. However, the first-quarter earnings announcement remains crucial, with the company's guidance for the current quarter expected to significantly impact its share prices.

As Tesla prepares to announce its first-quarter earnings, investors are eagerly awaiting the outcome. While analysts anticipate a further deceleration in revenue growth and net income, any positive surprises could potentially fuel a rebound in Tesla's share prices. Conversely, a miss on expectations may exacerbate the downward pressure. Tesla's performance in the first quarter of 2024 will undoubtedly be a pivotal moment for the company and its investors.

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