Elon Musk’s warning that high interest rates could sap electric-vehicle demand knocked shares of the sector on Thursday, with some analysts questioning if Tesla can maintain the runaway growth that has for years set it apart from other automakers.
The world’s most valuable automaker was set to lose nearly USD 50 billion in market value.
Rivian Automotive, Lucid Group and Fisker fell as much as 2.4%, while legacy automakers Ford and General Motors lost 1.1% and 0.4%, respectively.
The comments marked a change in tone from Tesla CEO Musk, who had said his company was “recession-resilient” last year. The EV maker missed revenue estimates on Wednesday by the most in more than three years despite hefty price cuts.
“It didn’t have the same zip. We await Tesla’s earnings calls with a sense of excitement and suspense – and they usually deliver. Not Wednesday night,” Canaccord Genuity analysts said.
The company is expected to cut prices further in the current quarter to meet its annual deliveries goal of 1.8 million vehicles, even after its gross margin contracted to 17.9% between July and September from 25.1% a year earlier.
“We continue to believe that Tesla is a car company, and that the competitive nature of the auto industry will make it difficult for any player to have a sustained profitability advantage,” Bernstein analyst Toni Sacconaghi said.
Overall, 10 analysts cut their price targets on the stock, pushing the median view to USD 260, according to LSEG data.
Tesla shares fell 5.2% to USD 230.12. If they maintain that level, they would close at their lowest since July 20, the day after reporting second-quarter results.
The stock has nearly doubled in 2023 on investor optimism that the company will fare better than rivals in an uncertain economy and see a long-term boost from its self-driving efforts.
The stock trades at about 59 times its 12-month forward earnings estimates, compared with 6.3 times for Ford and General Motors’ 4.2.
“The current market valuation appears to rest on the specious assumption that the hundreds of EVs slated for launch by 2025 will all be flops. Tesla does not operate in a vacuum,” said Craig Irwin, senior research analyst at Roth Capital.
