Tesla unveils latest move to offset demand slump as stock extends slide

Tesla  (TSLA)  shares edged lower Monday after the carmaker unveiled a fresh round of U.S. price cuts, raising further questions about the health of EV demand heading into the early months of the year.

Tesla shares have shed more than $200 billion in value over the past six months and are by far the worst-performing stock of the so-called Magnificent 7 tech giants as investors continue to reprice the group in the face of a pullback in demand, slumping profit margins and headline risks tied to CEO Elon Musk.

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The group itself in fact hinted at pending U.S. layoffs last week amid reports that performance reviews for some employees have been canceled and managers have been asked to make a "binary" assessment of roles across the company.

Tesla recorded deliveries of 485,000 over the final three months of last year, but fading demand, a series of price cuts, and costs linked to artificial-intelligence projects and the delayed Cybertruck took big chunks out of its bottom line.

Elon Musk has watched the value of Tesla fall more than $200 billion over the past six months.

Antonio Masiello&solGetty Images

Tesla's profit margins, probably the metric most closely tracked by Wall Street analysts, narrowed to 17.6% in the fourth quarter of 2023. That compares with a 23.8% margin over the same period in 2022 and analysts' estimates of around 18.3%.

The group also warned that 2024 vehicle-delivery growth rates would be "notably lower" than 2023 levels.

Reports Monday, meanwhile, suggest Tesla is issuing a temporary price cut of some of its Model Y cars in the U.S., echoing similar moves in China ahead of that country's Lunar New Year holiday. 

Musk: 'Essential quandary of manufacturing'

Tesla lowered the price of its rear-wheel and long-range Model Y by $1,000, to $42,990 and $47,990 respectively, with the new prices valid until the end of this month. 

Musk said the cuts are an attempt to address "the essential quandary of manufacturing: Factories need continuous production for efficiency, but consumer demand is seasonal."

The average price of a used Tesla has declined 19 months in a row, moving from a record high of $67,900 in July 2022 to a record low of $33,913 today. That's a 50% decline. $TSLA pic.twitter.com/WCUUmBBvi8

— Charlie Bilello (@charliebilello) February 11, 2024

Adding to the list of potential distractions for Tesla investors is the fact that Musk, who runs at least four major enterprises beyond the carmaker, is facing a ruling from U.S. Magistrate Judge Laurel Beeler, who ordered the billionaire to testify in person to a U.S. Securities and Exchange Commission probe into his $44 billion purchase of Twitter.

Musk, who closed the Twitter deal in late 2022 before renaming the microblogging platform X, has thus far refused to cooperate with the SEC's investigation into whether he followed securities rules in announcing his intention to buy the social media network in the spring of that year.

Musk has also made no secret of his longer-term vision for Tesla and its ability to leverage AI technologies.

Musk, who currently owns around 13% of Tesla following a series of major share sales to fund his Twitter purchase in 2022, said last month that he would need to build his AI and robotics vision outside the Tesla structure unless he could acquire at least a 25% voting stake.

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Tesla: Cloudy with a chance of long-term gains

Wedbush analyst Dan Ives, however, who carries an outperform rating with a $315 price target on Tesla, remains firm in his long-term conviction for the stock. 

"We could not disagree more with the ultranegative Tesla narrative building and forming a black cloud over the stock," he said. 

"While the next few months are clearly a bit cloudy for the Tesla story and overall EV demand, longer term our view is that by the end of the decade ~20% of autos will be EV with autonomous and [Full-Self-Driving] a reality and not a dream/aspiration." Full-Self-Driving is Tesla's premium driver-assistance system.

"We believe despite not committing to it on the [fourth quarter earnings conference call in late January], the vast majority of price cuts are now done with gradual price increases/margin expansion likely over the next six months," Ives added.

Tesla shares were marked 0.3% lower in premarket trading to indicate an opening bell price of $193.00 each, a move that would leave the stock down more than 22% so far this year.

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