The stock price of Elon Musk’s electric car company Tesla is down, trading at $162,55 after the carmaker slashed prices to keep profits. But that’s not everything bothering Musk, as his other companies, SpaceX and the recently acquired Twitter, are the target of public scrutiny. For one part, SpaceX’s latest rocket launch test ended up with an explosion —the public considers this a failure, despite SpaceX’s PR stunts—and for another, Twitter’s —come and go— decisions regarding the Blue checkmarks on public figures sparked harsh criticism and notoriety.
Just a couple of days ago, Tesla’s earnings didn’t make it up to investors’ expectations, and the investors are considering that the value of this company’s stock seems overpriced. And although Tesla dropped prices to retain money and market share, which usually is positive for revenue, it ended up slashing its margins; as such, the stock price takes a dip after earnings are posted. This price drop comes as a response to market dynamics, as Tesla seeks to satisfy the demand for their cars, but there’s not enough demand for those kinds of cars in this economy.
Tesla Price Drops After Posting Earnings
As stated in our introduction, carmaker Tesla’s stock price is down after the Elon Musk-owned company decided to slash the price tags on their cars to make them more competitive in the electric car market, with a response on investor’s behalf of selling their stock and a consequent stock price drop to $162,55 at yesterday’s close.
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When Tesla Sacrifices Profits, Margins Suffer Too
The company is sending profits to the sacrificial altar seeking growth, but as usual, the laws of economics and accounting come into play because low price equals low profits; if your low prices increase your revenue (because you’re selling more), then your profits can go up. But the reality bites hard for Mr. Musk —who seems too busy posting trolling memes on Twitter, his latest toy and whim, and blowing up enormous rockets—because the low price tag is just aimed at keeping some revenue while sacrificing Tesla’s profits amidst a market where buyers simply aren’t getting an electric car.
Tesla’s Stock Price En Route To Keep Going Down
If the $162,55 price per stock seems low, a look at Tesla’s performance on the charts seems disenchanting because, in the long term, it looks as though having Tesla in your portfolio is hurting your performance; that’s if you held Tesla stock before the dip. Otherwise, you can buy the dip and sell the run, but you won’t buy the stock price dip of a company that’s not performing well on the 200-day moving average.
Red Numbers Indicate Underperformance
Moreover, Tesla’s accounting reports a $2.5 billion revenue in the first quarter of 2023, but that means that the company dropped $3.7 billion last year and more than three billion in Q1 2022. Though Tesla made more cars than its competitors, Musk’s company market share continues to slip as its rivals (Ford, GM, and VW) are selling EVs at lower prices. While Tesla in China was overtaken by local BYD. Additionally, when Tesla’s CFO was asked by the press about a 2023 forecast for the company’s gross margins, he said that such intel would be difficult to provide because there’s a lot of uncertainty in the economic field.
With a bearish market trying to bounce back into positive digits, it’s likely that Tesla’s price will continue dropping. How big is that drop? It depends on many factors, but for the moment, Elon’s objective of building 20 million cars by 2030 seems a bit far away because man can flood the market with cars, but no one is buying them. In the past year, Tesla’s price took a dip of 24%; again, while that sounds like a bargain if you’re seeking to invest, again, consider how the company is performing because you can buy at a low price, only to see it go down even lower.
Also Read: Why Elon Musk Fired Parag Agrawal? Everything To Know
