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Tesla’s stock hits a speedbump on Q4 print

 

Friday, January 26, 2024

Today’s headlines

What’s happening: Shares of Tesla fell sharply on Thursday, after the company released results for its fourth quarter.

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

Apart from weak profits, concerns around the company’s profitability exerted pressure on the stock.

How were the results: The Austin, Texas-based company reported a low single-digit increase in sales for the fourth quarter.

  • Revenues grew by 3% year-over-year to $25.17 billion but came in below the consensus estimates of $25.62 billion.
  • Earnings of 71 cents per share missed Wall Street expectations of 74 cents per share.

Why it matters: Last year, Tesla had announced several price cuts in a bid to boost sales, which negatively impacted profitability. The company also warned that its growth rate will be “notably lower” in 2024, as it invests in its next-generation electric vehicle.

The EV maker’s gross margins shrank to 17.6% in the fourth quarter, from 23.8% in the year-ago quarter, and missing market expectations of 18.3%. Although gross margins from automotive trade, excluding regulatory credits, narrowed to 17.2%, from 24.3% in the year-earlier quarter, it expanded from 16.3% in the third quarter.

Tesla said its top- and bottom-line figures were impacted by growth in the deliveries of vehicles that have lower average selling prices.

Automotive revenues rose by 1% year-over-year to $21.56 billion during the quarter. The company said its Model Y was the best-selling vehicle worldwide last year.

Tesla had earlier posted production and delivery numbers for the fourth quarter. The company’s deliveries surged 19.55% year-over-year to 484,507 units, while production rose 12.57% to 494,989 units.

Global production grew to a record annualised run rate of approximately 2 million vehicles in the latest quarter.

“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,” Tesla said in a statement.

How shares responded: Tesla’s shares tanked 12.1% to settle at $182.63 on Thursday, following the release of quarterly results. The stock has lost around 29% over the past month.

What to watch: Investors will monitor Tesla’s plans to launch a new model, global delivery figures of its previous models, and whether the company is able to increase the average selling prices of its vehicles.

The markets today

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

Context: The US dollar index moved higher on Thursday, as investors digested the latest economic reports.

Details: Data released on Thursday suggested a better-than-expected GDP figure for the US for the fourth quarter. According to the estimate, the US economy expanded at an annualised rate of 3.3% in the fourth quarter, stronger than market estimates of a 2% expansion. The reader was, however, short of the growth of 4.9% reported for the previous quarter.

US durable goods orders came in almost unchanged in December, missing market estimates of a 1.1% increase. The number of people filing for jobless benefits in the country increased by 25,000 to 214,000 in the latest week, higher than market estimates of 200,000. Moreover, the US goods trade deficit contracted to $88.5 billion in December, from $89.3 billion in the prior month, with exports increasing more than imports last month.

Despite these mixed results, the Federal Reserve is widely expected to keep interest rates unchanged at its meeting next week. There are some speculations of the US central bank cutting interest rates by 25bps at its March meeting.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.3% to 103.57 on Thursday.

The EUR/USD forex pair fell around 0.4% to 1.0849 on Thursday, after the European Central Bank kept interest rates unchanged for a third time, as was widely expected.

What to watch: Investors await the release of economic reports on PCE prices, personal income, personal spending and pending home sales from the US today. Analysts expect core PCE prices, the Federal Reserve’s preferred measure of inflation, to increase 0.2% in December, after a 0.1% rise in November.

Core PCE prices, which rose by 3.2% year-on-year in November, are expected to increase by 3% in December. Personal income is projected to improve by 0.3% in December, while personal spending is likely to rise 0.4%. Pending home sales, which came in unchanged in November, are expected to increase 1.5% in December.

Other Markets: European indices closed higher on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.03%, 0.10%, 0.11% and 0.30%, respectively.

The news shaping the markets

The White House urged US senators to reach an agreement related to military support for Ukraine for border security. The news sent the RUB/USD pair slightly lower in forex trading this morning.


Thailand unexpectedly recorded a trade surplus of $0.97 billion in December, versus a year-ago deficit of $1.03 billion, lending support to the THB/USD forex pair.


The Philippines posted a trade deficit of $4.01 billion in December, versus a year-ago gap of $4.52 billion in the year-ago month. However, both imports and exports declined, which sent the PHP/USD pair lower in forex trading this morning.


Singapore’s private home prices rose by 2.8% in the fourth quarter, following a 0.8% increase in the third quarter. This being the second consecutive quarter of growth in private home prices lent support to the SGD/USD forex pair.


The UK’s GfK consumer confidence indicator improved to -19 in January, from December’s reading of -22. This being the strongest level since January 2023 and surpassing market estimates of -21 sent the GBP/USD pair higher in forex trading this morning.

What else to watch today

Germany’s GfK consumer climate indicator, France’s consumer confidence, Spain’s unemployment rate, Eurozone’s loans to non-financial corporations, household credit growth and money supply M3, Brazil’s value of outstanding loans and mid-month inflation rate, India’s value of loans, deposit growth and foreign exchange reserves, Mexico’s trade balance, Canada’s wholesale sales and government budget value, Argentina’s consumer confidence indicator, US Baker Hughes crude oil rigs and Baker Hughes total rigs count.


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