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Tesla craters (again) amid weaker deliveries

It looks like the decline is far from over as bears regained control and pushed the stock price down to $108.

Another pessimistic day for Testa as the stock price declined another 10% to its cycle lows near $108.

Rising shipments, but not enough

Tesla’s fourth-quarter shipments increased 18% sequentially to 405,000, falling short of the average estimate of 418,000. The number increased Tesla’s total deliveries for 2022 to 1.3 million units, an increase of 40% year-over-year but below the company’s projection of 50%.

The delivery shortfall exacerbated Wall Street’s concerns about Tesla’s car demand, which was a significant cause of the stock plummeting 65% in 2022.

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Following Elon Musk’s prediction of an “epic” finish to the year, Tesla reduced vehicle costs and manufacturing in China and provided $7,500 discounts in the United States. Concerns over increasing interest rates, inflation, and other economic headwinds, as well as worry over Musk’s antics on Twitter, which he now controls, led to a 37% decline in December and a 65% decline in 2017 for Tesla shares.

The savings Tesla gave at the end of the quarter in the United States equaled the maximum tax credit for electric vehicles under the Inflation Reduction Act, which President Joe Biden signed into law in August. Late last month, the Internal Revenue Service issued a list of electric and plug-in hybrid vehicles eligible for federal tax credits, which was a setback for the automaker.

Without question, competition is rapidly entering the worldwide market. In addition, there is likely some market deceleration owing to economic conditions and barriers to EV adoption. However, the stock’s valuation has already reached what appears to be a decent level, given growth remains robust by traditional measures. The stock may continue to decline, and Tesla will offer further information when it releases its complete quarterly report on January 25.

Analysts turn bearish

The analyst at JPMorgan, Ryan Brinkman, lowered his earnings projections and price target for Tesla following the disappointing news.

Brinkman expects Tesla will miss fourth-quarter profit projections ($1.19) when the company releases its results in late January. Brinkman now projects profits per share of $4.60 for 2023, down from $4.84 earlier.

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The analyst’s price estimate was decreased from $150 to $125. He still rates the stock as underweight (sell equivalent).

“We believe that Tesla is facing a significant demand problem,” Toni Sacconaghi, a Bernstein analyst who also has the equivalent of a sell rating on the stock, wrote in a report Monday. “We believe Tesla will need to either reduce its growth targets (and run its factories below capacity) or sustain and potentially increase recent price cuts globally, pressuring margins.”

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