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Tesla shares continue to roll downhill on Q3 print

 

Thursday, October 19, 2023

Today’s headlines

What’s happening: Shares of Tesla fell in after-hours trading on Wednesday, following the release of the company’s third-quarter results.

What happened: The EV maker reported weaker-than-expected earnings for the latest quarter on Wednesday.

However, Tesla reiterated its full-year outlook for deliveries despite recording lower profit margins for the third quarter.

How were the results: The Austin, Texas-based company reported a sharp decline in adjusted earnings for the three months ending in September.

  • Revenues grew by 9% year-over-year to $23.35 billion, missing the consensus estimates of $24.38 billion.
  • Adjusted earnings contracted 37.1% year-over-year to 66 cents per share in the third quarter and came in below the Wall Street expectations of 73 cents per share.

Why it matters: Tesla announced the implementation of several upgrades during the latest quarter in a bid to increase the production going ahead. The company also started the pilot production of Cybertruck at Gigafactory Texas and said it expects to begin deliveries in November.

Tesla’s automotive revenues rose 5% year-over-year to $19.6 billion. The company reported production of 430,488 units and deliveries of 435,059 units for the quarter.

Gross margins shrank to 17.9%, from 25.1% in the year-ago quarter and from 18.2% in the second quarter. Its operating income was impacted by expenses associated with the launch of Cybertruck and investments in AI.

Tesla closed the quarter with $441 million in digital assets, compared to the $465 million recorded in the prior quarter.

Tesla maintained its guidance for deliveries of 1.8 million vehicles for the full year.

How shares responded: Tesla’s shares fell 4.2% to $232.40 in extended trading hours, following the release of quarterly results, after falling around 4.8% during the regular trading hours. The stock has lost around 9% over the past month.

What to watch: Investors will continue focusing on Tesla’s delivery numbers as the company will have to deliver about 477,000 vehicles in the final quarter to reach its target of 1.8 million. Markets also await the launch of the company’s much-awaited Cybertruck next month.

The markets today

The US dollar will be in focus today ahead of a basket of economic reports

Context: The US dollar recorded gains versus the euro on Wednesday, while one of the major currencies surged to a one-week high versus greenback before retreating later in the session.

Details: EUR/USD forex pair came under pressure amid strength in the greenback, which benefited from prospects of the US Federal Reserve keeping interest rates higher for longer to bring the country’s inflation rate down to its 2% target.

Investors are closely monitoring comments from Fed officials to get more insight into the central bank’s upcoming rate moves. Heightened geopolitical unrest in Ukraine and Israel also provided a boost to the greenback.

The US dollar index gained around 0.3% to reach 106.57 on Wednesday, remaining decisively below the 107.34 level recorded on October 3, which was the strongest level since November 2022.

The EUR/USD forex pair fell around 0.4% to 1.0539. The European currency had reached the lowest level since December 2022 of 1.0448 on October 3.

Since mid-July, the benchmark 10-year Treasury yield has gained around 100 basis points, while the US dollar index has climbed about 7%.

The Chinese yuan rose sharply after data showed the country’s economy expanding at a higher-than-expected rate in the third quarter. Data on retail sales and industrial production also topped estimates. The yuan climbed to a one-week high of 7.2905 versus the US dollar but retreated later during the session.

What to watch: Investors await the release of economic reports on initial jobless claims, Philadelphia Fed manufacturing index and existing-home sales from the US today. The number of persons filing for jobless benefits, which came in at 209,000 in the week ending October 7, is expected to increase to 212,000 in the latest week.

Analysts expect the Philadelphia Fed Manufacturing Index to improve to -7 in October, from -13.5 in September. Existing home sales are likely to fall 3.5% in September, following a 0.7% decline in August.

Other Markets: European indices closed lower on Wednesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 1.14%, 1.03%, 0.91% and 1.05%, respectively.

The news shaping the markets

Russian President Vladimir Putin warned the US after its decision to supply ATACMS missiles to Kyiv. The news sent the safe-haven US dollar index slightly higher this morning.


China’s average new home prices declined by 0.1% year-over-year in September. Prices declining at the same pace for the third month lent support to the CNY/USD forex pair.


The Bank of Korea held its base rate at 3.5% at its latest meeting, which sent the KRW/USD pair lower in forex trading this morning.


Japan recorded a trade surplus of ¥62.44 billion in September, compared to a year-ago deficit of ¥2,099 billion, which lent support to the JPY/USD forex pair.


Colombia’s leading economic indicator rose by 0.23% year-over-year in August. This being the fourth month of economic activity expanding sent the COP/USD pair higher in forex trading this morning.

What else to watch today

France’s manufacturing climate indicator and business climate indicator, Indonesia’s value of loans and Central Bank of Indonesia interest rate decision, Eurozone’s current account, Spain’s balance of trade, South Africa’s value of recorded building plans passed, Turkey’s gross foreign exchange reserves, Brazil’s IBC-Br index of economic activity, Canada’s producer price inflation and raw materials price index, US continuing jobless claims, CB leading index and natural gas stocks change, as well as China’s foreign direct investment.


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