Tesla (TSLA) stock was on pace to end the week down 4% on Friday as the EV maker missed Wall Street estimates on its third-quarter deliveries, issued a recall and discontinued a lower-priced model.
The Elon Musk-helmed electric vehicle maker delivered 462,890 EVs during the three months ended Sept. 30. While that was just a nose hair behind the 463,897 Wall Street expected, disappointed investors drove Tesla shares down more than 3% following the report Wednesday. The slight miss marked the fourth consecutive quarter that Tesla has fallen short of analyst forecasts.
The saga continued on Thursday, when the stock dropped another 3% after Tesla quietly discontinued its cheapest EV model. Wedbush’s Dan Ives said the discontinuation of its Model 3 sedan was aimed at removing Tesla’s last shred of reliance on auto parts made in China, given rising trade tensions. The Model 3 Standard Range Rear-Wheel Drive was the last of Tesla’s vehicles to use lithium iron phosphate (LFP) battery cells sourced from China, Ives said. Just two years ago, about half of Tesla EVs used the cheaper LFP batteries.
Separately on Wednesday, Tesla recently issued its fifth recall for Tesla Cybertrucks this year. Tesla recalled over 27,000 of the silver, spaceship-esque electric pickups due to issues with their rearview cameras, which failed to comply with federal safety standards.
The rough week comes as Tesla has faced a number of high-profile issues over the past year — from safety concerns over its Autopilot feature and mass recalls to factory shutdowns, layoffs, and heightened competition in China. Three senior Tesla executives resigned this spring, and Bloomerg reported Thursday that its long-standing chief information officer, Nagesh Saldi, will also depart the company.
The stock was up 4% in afternoon trading Friday as a strong September jobs report lifted the market.
Tesla stock has been on a rollercoaster ride, plummeting after its dismal first quarter earnings report in April, then recovering in July when Tesla fared better than expected in the following earnings period thanks to price cuts.
Now, Narayan said, all eyes are on Tesla’s upcoming robotaxi event, which will either cement Elon Musk’s reputation as an AI leader — or cast doubt on his lofty goals.
In a bullish note to investors Friday, Wedbush’s Dan Ives said, “We believe Robotaxi Day will be [a] seminal and historical day for Musk and Tesla and marks a new chapter of growth around autonomous, FSD, and AI future at Tesla.”
“We continue to believe Tesla is the most undervalued AI name in the market and we expect Musk & Co. to unveil some ‘game changing’ autonomous technology at this event next week,” he added. Ives is part of the 44% of Wall Street analysts who recommend buying the stock. He sees the stock rising to $300 over the next twelve months, much higher than the consensus estimate of about $217, according to Bloomberg data.
RBC analyst Tom Narayan told Yahoo Finance that while he has high hopes for a future of self-driving robotaxis, the event is unlikely to send Tesla stock soaring.
“I think it’s difficult to get excited on a stock on something so high level,” he said, noting that the launch will showcase Tesla’s big picture vision for AI and autonomous vehicles — a vision that he says will probably take several years to become “financially meaningful” for the EV maker.
Narayan believes Tesla’s rapidly growing energy storage business will be another big boon for the company, as well as Tesla’s sale of EV credits that he says could generate “billions” next year.
JPMorgan (JPM) analysts has a more tempered outlook on Tesla, giving it an underperform rating. Though Tesla’s third quarter deliveries weren’t far below Wall Street’s recent forecasts, JPMorgan noted that deliveries were a long shot from the numbers analysts projected just a couple of years ago, before tempering their expectations. In October of 2022, J.P.Morgan said, analysts predicted that Tesla would deliver 651,000 EVs — about 29% more than the company actually reported for the period.
And its self-driving vehicle dreams could face barriers to mainstream acceptance. Companies’ efforts to integrate autonomous taxis into city traffic have so far gone haywire. Alphabet-owned (GOOG) Waymo was investigated by the federal government after crashes and traffic violations this spring, and in June, the company recalled its fleet of nearly 700 driverless cars. General Motors-owned (GM) Cruise suspended operations last year when a driverless cab hit a pedestrian and dragged her 20 feet.
JPMorgan on Thursday lowered its full year guidance for Tesla’s earnings per share to $0.60 from $0.64, adding that its underperformance in the third quarter means Tesla could face its first ever year in which deliveries fail to grow. They said that because of an ongoing disconnect between Tesla’s fundamentals and stock market hype, a 2024 deliveries miss would be “another contributing factor to cause more investors to pay more attention to the growing gap between fundamentals and valuation” rather than “any sort of ‘ah ha’ moment” in which the stock plummets.
Laura Bratton is a reporter for Yahoo Finance.
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