Tesla shares plummet
Musk promises huge price gains
By Jan Ganger
10/20/2022 11:53 am
Tesla shares have plummeted since the record high. After presenting the quarterly figures, things continue to go downhill. But Tesla boss Elon Musk invokes the company’s potential and promises an “epic end of the year”. That must have a special reason.
Elon Musk is trying his best to talk Tesla shares up. After presenting the quarterly figures, the boss of the electric car pioneer surprised with a bold forecast: Tesla could be worth more than Apple and the Saudi oil producer Aramco together.
That is quite ambitious. Because Apple and Aramco are currently traded on the stock exchange as the world’s most valuable companies. The Americans have a market cap of $2.3 trillion, while the Saudis are worth $2.1 trillion. Tesla is worth $700 billion. That means: The course has to increase sixfold in order to reach the common level of the two giant corporations.
Tesla shares had rallied since early 2020, soaring from under $30 to a record high of $414 in November last year. Since then, however, things have gone downhill, and the price has now almost halved.
In the third quarter, Tesla had earned $3.3 billion on balance, twice as much as a year earlier. Around 344,000 vehicles were sold, an increase of 35 percent. But analysts point to problems: Rising costs in car production are making themselves felt in the gross margin. Tesla is also feeling higher logistics costs.
“Epic End of the Year”
In addition, there are problems with the introduction of a new production process for batteries, which should bring great cost advantages. “Inflation in raw material costs impacted our profitability along with the inefficiencies of the new factories in Berlin and Texas and the production of the new 4680 batteries,” Tesla said. Or as managing director Andrew Baglino put it: “There are still challenges that we have not yet overcome. No question.”
According to analysts, the economic downturn will not leave the world’s highest-rated automaker unscathed. Signs of this are expensive inventories – a novelty for the electric car pioneer, which has always produced fewer vehicles than it has been able to sell.
Concerns that high inflation rates, rising interest rates and a recession could slow down business were brushed aside by Musk during the obligatory conference call with financial analysts. “It looks like we’re going to have an epic end of the year,” announced the tech billionaire, predicting a “record-breaking” final quarter and adding: “We have excellent demand.”
A major reason for Musk’s demonstrative optimism could be the announced takeover of Twitter. The richest man on the planet is offering $44 billion. The deadline is October 28 to close the deal. Musk is Tesla’s largest shareholder with a 15 percent stake. Analysts believe he will have to sell about $3 billion worth of stock to fund his part of the purchase.
Against this background, it should be very inconvenient for Musk that Tesla shares fell by almost seven percent after the US market closed. The reason: Investors had expected even better numbers. The expectations were just too high.