To The Moon

Tesla's stock fell more than 12% last night, the largest single-day drop in over two years, due to disappointing fourth quarter deliveries, despite incentives and promotions.

Disappointing demand amid weak demand and stiff competition

Tesla's fourth-quarter deliveries increased 18% compared to the previous quarter, reaching a total of 405,000. This falls short of the expected 418,000 deliveries according to consensus forecasts. Despite the year-over-year increase of 40% in deliveries in 2022, it falls below the company's own guidance of a 50% increase, although Tesla has already implemented various strategies, such as offering discounts and subsidizing insurance costs, in an effort to boost sales.

Analysts have identified a number of challenges for Tesla, including weak demand in China, the world's largest auto market, as well as competition from established automakers such as Ford and General Motors, and from newer companies like Rivian and Lucid.

The underwhelming fourth quarter delivery numbers have prompted at least four brokerage firms, including JP Morgan, to revise their earnings forecasts and lower the price target for Tesla in 2023. It is likely that more analysts will also adjust their earnings outlook for the company following this news.

In contrast, BYD sold a record number of electric vehicles in December, solidifying its position as the top seller of non-fossil fuel vehicles worldwide. This success validates the investment made in the company by Warren Buffett's Berkshire Hathaway. BYD has set new monthly sales records for 10 consecutive months since March 2022, beating Tesla since second quarter.

Musk: the distracted CEO who cried wolf

To fund his new venture, Musk has sold billions of dollars’ worth of Tesla shares, including a large amount following the $44 billion buyout, despite promising not to sell any more stock previously. This has dealt a serious blow to Tesla shareholders and its very difficult to believe what Musk promised now.

With so many issues ongoing for Tesla, Musk is still pretty pre-occupied with his newly bought Twitter, which is also facing multiple chaotic problems on its own. Recently, he asked Twitter users if he should resign as CEO of the company, and the majority of respondents said that he should step down.

More pain to come

The drop in share price signals that Tesla shareholders have revised down their earnings outlook for the company. In my opinion, there is no doubt Tesla is led by visionary leadership, backed by a management team with a track record of successful execution. However, with disappointing deliveries in spite of higher incentives, I fear that Tesla’s problem has not reached a bottom yet. Be careful!

@Daily_Discussion @TigerStars