Tesla Stock Continues to Crash After Disappointing Earnings Call
San Francisco – Tesla’s stock price has continued to fall sharply in the two days following the company’s third quarter earnings call on October 19. After declining 9.3% on October 20, Tesla’s stock price fell an additional 3.69% on October 20th, bringing the total two-day decline to about 12.9%. This steep drop has erased billions in market value for the electric vehicle maker.
The declines come on the heels of a disappointing third quarter earnings report in which Tesla missed expectations for both earnings per share and revenue. Tesla reported Q3 EPS of 66 cents, below analyst estimates of 81 cents per share. Revenue came in at $21.45 billion, also shy of expectations of $21.94 billion.
In addition to the revenue and earnings misses, Tesla’s plummeting operating margin appears to be concerning investors. Operating margin for Q3 was just 7.6%, down significantly from 17.2% in Q3 2021. Rising costs, supply chain issues, and recent price cuts all contributed to the shrinking margin.
Other factors worrying investors include Elon Musk’s comments that the soon-to-launch Cybertruck won’t generate meaningful positive cash flow for 12-18 months after production starts. This suggests profitability of the much-anticipated vehicle may be lower than hoped. Additionally, Tesla’s solar installation business saw a 48% year-over-year decline in Q3 installs, sparking worries about challenges in that portion of the business.
Broader macroeconomic concerns, such as rising interest rates and recession fears, are also likely contributing to the Tesla stock decline. As a high-profile growth company, Tesla often experiences pronounced stock price swings in periods of market volatility.
While the electric car maker has its defenders on Wall Street, some analysts believe Tesla stock may still have further to fall. Citing the company’s slowing revenue and earnings growth in recent quarters, bears argue the stock price may still be overvalued.
Tesla bulls counter that the company is still well-positioned for long-term growth in electric vehicles, solar, and energy storage. However, in the short term, Tesla investors should brace for continued volatility as the company navigates a challenging economic environment.
