be warned

Texas-based EV giant foresees profit crunch amid price drops, slowing growth

Tesla warned that sales growth this year may be “notably lower” than the 2023 growth rate, as it works to launch a more affordable next-generation vehicle at a factory near Austin. Photo courtesy of Tesla

Shares of Tesla tumbled at the opening bell Thursday as the electric vehicle, solar panel and battery maker warned investors of slower sales growth this year after posting fourth-quarter results that were weaker than most had expected.

In a letter to shareholders released Wednesday, Tesla warned that sales growth this year may be “notably lower” than the 2023 growth rate, as it works to launch a more affordable next-generation vehicle at a factory near Austin.

Tesla, the letter said, is between two big growth waves, one from global expansion of the Models 3 and Y, and a second coming from the new vehicle.

The company, which is headed by billionaire Elon Musk, reported a fourth-quarter adjusted profit of 71 cents per share on revenue of $25.17 billion. Analysts polled by FactSet predicted a profit of 73 cents per share. Revenue was expected to be $25.64 billion.

Profits were off because Tesla lowered prices worldwide through the year in an effort to boost its sales and market share.

Shares slid more than 9 percent in Thursday morning trading.

Wedbush's Dan Ives said in a client note that Tesla's conference call on Wednesday to go over its financial results left many frustrated.

“Consistent with last quarter’s call, investors wanted to get their arms around the falling margins and constant, never ending price cuts seen globally, but instead, we heard from a much more cautious Musk who focused on production, next-gen vehicle timelines, and FSD/AI investments where much of the larger Tesla story was talked about instead of concrete guidance,” Ives wrote.

Still, the analyst remains optimistic on Tesla, believing that electric vehicle adoption to a broader mass market is near. However, Ives concedes there are still challenges to contend with.

“This is a pivotal period for Musk to get Tesla through that will help shape (or haunt) its EV future," he said.

Jeffrey Osborne of TD Cowen said that in the short term, it will be hard for EV competitors to catch up to Tesla as the company focuses on electrical efficiency and investing in battery technology. However, the analyst said there is “a great deal” of production-related risk in coming quarters that could possibly pressure margins and the stock as Tesla ramps up new plants in Germany and Texas and new vehicles.

A year ago, Tesla announced its plans to expand its Texas facility.

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A View From HETI

Musk has said Tesla will hold a shareholder meeting in November. Photo via Getty Images

Tesla has scheduled an annual shareholder meeting for November, one day after it came under pressure from major shareholders to do so.

Billionaire Elon Musk's company said in a regulatory filing on Thursday that the meeting would be held Nov. 6, but that may prove troublesome because it comes nearly three months after it is required to do so under state law in Texas, where the company is incorporated.

The annual meeting, given Tesla's fortunes this year, has the potential to be a raucous event and it is unclear how investors will react to the delay, which is rare for any major U.S. corporation.

Tesla shares have plunged 27% this year, largely due to blowback over Musk's affiliation with President Donald Trump, as well as rising competition.

The announcement of the meeting comes a day after a group of more than 20 Tesla shareholders sent a letter to the company's board pressing for an annual meeting after receiving no word of one with the deadline just days away.

Many shareholders have been miffed by Musk's participation in the Trump administration this year, saying he needs to focus on his EV company which is facing extraordinary pressures.

“An annual meeting provides shareholders with the opportunity to hear directly from the board about these concerns, and to vote for or against directors, the board’s approach to executive compensation, and other matters of material importance,” the group said in the letter.

The group cited Texas law, which requires companies to schedule annual shareholders meetings within 13 months of the prior annual meeting.

Tesla’s last shareholders meeting was on June 13 of last year, where investors voted to restore Musk’s record $44.9 billion pay package that was thrown out by a Delaware judge earlier that year.

Also on Thursday, Musk that the Grok chatbot will be heading to Tesla vehicles.

“Grok is coming to Tesla vehicles very soon. Next week at the latest,” Musk said on social media platform X, in response to a post stating that Grok implementation on Teslas wasn't announced on a Grok livestream Wednesday.

Grok was developed by Musk’s artificial intelligence company xAI and pitched as an alternative to “woke AI” interactions from rival chatbots like Google’s Gemini, or OpenAI’s ChatGPT.

Shares of Tesla rose 3% at the opening bell after tumbling this week when the feud between Trump and Musk heated up again.

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