VLKAF - Tesla: Growing Challenges Amid Disappointing Earnings

2024-04-23 18:15:28 ET

Summary

• Sales growth of electric vehicles is slowing down significantly, with EV stock prices plummeting and revenue declines for certain companies.
• Tesla, once the undisputed champion, misses earnings significantly amid challenges such as tough competition, lower demand, falling margins, and high valuation.
• Tesla seems to be overvalued, and its stock is prone to a further decline in the current environment.
• The sentiment around Tesla after its Q1 2024 earnings remains dull. The revenue and EPS miss reaffirm the bearish sentiment.

Tesla Is Struggling

The hype surrounding electric vehicles (EVs) is cooling down. While EV sales soared in 2021 and 2022, there are multiple examples of that growth slowing significantly. Some analysts point to a substantial decline in EV stock prices, with certain companies experiencing serious revenue declines in the past year. This could indicate a more cautious market outlook on the short-term trajectory of the electric car adoption.

Tesla, Inc. (TSLA), as a front-runner of the revolution in the automotive industry, is in the midst of a tough battle in terms of vehicle prices, tough competition, lower-than-expected demand, falling margins, and all the issues characterizing an industry with terrible economics. Moreover, Tesla just missed earnings expectations big time with the biggest revenue decline YTD since 2012.

Little over a year ago, I posted an article, " Tesla And Terrible Business Economics ," presenting a bearish thesis for the company and its midterm future. The piece remains valid one year later, and the EV maker has dropped 27.93% since then, being currently the worst-performing stock YTD in the S&P Index (SP500). CEO Elon Musk keeps painting a futuristic vision of a world dominated by renewable sources of energy and alternative ways of powering vehicles. Yet, the reality looks different, especially considering regions other than Silicon Valley, the New York metropolitan area, or a few other wealthy parts of the world....

For further details see: