The market is punishing the Tesla Inc (NASDAQ: TSLA) share price in after-hours trading. Shares in the electric vehicle company are down 6% to US$195.38 following the posting of its fourth-quarter results.
While expectations were low heading into earnings, figures for the latest quarter fell below the forecasts. With the impacts of price cuts on full display, investors are deciding to put the selling pressure on.
The sliding price adds to a 16.4% decline in Tesla's share price since the beginning of the year.
Image source: Getty Images
Price cuts slash Tesla share price
Wall Street analysts hoped to see total revenue of US$25.7 billion in Q4. The figure would represent a modest increase of 5.9% from the prior corresponding period. Instead, Tesla landed a lesser US$25.2 billion, growing the top line by 3% year-on-year.
The company's total revenue can be broken into the following:
- Automotive revenues — US$21.56 billion, up 1%
- Energy generation and storage revenue — US$1.44 billion, up 10%; and
- Services and other revenue — US$2.17 billion, up 27%
Adding to the pain, Tesla's gross margin weakened further to 17.6% compared to 23.8% a year ago. This margin softness has coincided with a significant fall in lithium prices — one of the major cost inputs in the company's vehicles.
On a positive note, the operating margin moved in the right direction, improving to 8.2% from 7.6% in the previous quarter. Yet, the incremental improvement is not enough to electrify the Tesla share price today.
A couple of inhibitors to revenue were named in the presentation. Firstly, the reduced vehicle average selling price, a byproduct of several price cuts over the past year. And secondly, lower full self-driving revenue recognition.
Earnings were another disappointment for Wall Street, falling 40% to 71 US cents per share in Q4. Increased expenses associated with AI and research and development weighed on earnings. In addition, ramping up production of Tesla's Cybertruck (pictured above) ate into profits.
Slower road ahead
Another deadweight hanging from the Tesla share price could be the commentary on vehicle production growth for 2024.
In the outlook, it was said, "In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle at Gigafactory Texas."
Total production increased 35% to 1.845 million vehicles in 2023.
