Investors who have held shares in electric vehicle maker Tesla (TSLA) over the past year are in quite a bit of pain, with shares declining 70% 2022. In December alone, the share suffered near 40% losses, netting its fifth straight month of declines.
As evidenced by the company’s fourth quarter delivery totals, don’t hold your breath expecting the pain to subside anytime soon. On Tuesday the shares plunged as much as 15%, falling to a new 52-week low of $104.64, marking the company’s biggest intraday decline since September 2020. The reason for the punishment? The company said on Monday announced delivered 405,278 vehicles to customers in the last three months of the year, missing the consensus estimate of 420,760 that analysts had forecasted.
The delivery miss raised more concerns about the level of competitive demand pressure Tesla has begun to face even as it ramps up production capacity at its various plants. And it hasn’t helped that many analysts believe that CEO Elon Musk’s purchase of Twitter, where he currently serve as CEO, will stretch him too thin to get Tesla back on track. These same Wall Street analysts wasted little time cutting their price targets on the stock, leaving Tesla with its lowest average 12-month target price since October 2021.
However, while the Q4 delivery miss raised alarm bells about Tesla’s growth capabilities, not everyone sees this as a doomsday scenario. Peter Garnry, head of equity strategy at Saxo Bank, noted that “This year will likely prove to be a difficult one for Tesla due to margin pressures and ever-growing competition, but the EV maker is here to stay and demand will continue to grow.” Meanwhile, Truist analyst William Stein is also optimistic, suggesting now might be the best time to buy Tesla stock, writing in a report, “Long-term investors should keep their eye on the prize and buy TSLA."
To be sure, Stein lowered his price target on the shares to $299 from $348. However, from current levels of around $112, that still represents potential premiums of 166%. Cathie Wood, CEO of flagship Ark Innovation ETF (ARKK), hasn't wavered in her bullish opinion of Tesla. The innovation-focused asset manager bought more than 175,000 Tesla shares across two of her actively managed ETFs. Wood and her team have been actively buying Tesla over the past month, acquiring close to 400,000 shares from December 16 through the end of 2022 as it has made new 52-week lows.
Time will tell if these are prescient acquisitions. For now, while there are still some questions about Tesla’s first half 2023 results, namely gross margin improvement; the stock is now more attractive from a risk-versus-reward perspective. Tesla is set to report fourth quarter earnings on Wednesday, January 25 after the close. In the three months that ended December, Wall Street expects the company to earn $1.22 per share on revenue of $25.1 billion. This compares to the year-ago quarter when earnings came to 85 cents per share on revenue of $17.72 billion.
For the full year, earnings are expected to rise 77% year over year $4.01 per share, while full-year revenue of $82.47 billion would rise 53% year over year. As strong as these year-over-year comparisons might appear, the company’s increased focus on its growth strategy, namely production and profit margins, will be a key driver for the stock in 2023. Assuming a top and bottom line beat, and strong guidance for the the full year, the shares might rally. But analysts will focus on automotive gross margin, which has trended in the wrong direction in the past couple of quarters.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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