Tesla Q4 - Needs a recharge

On Wednesday night, Tesla reported their quarterly numbers, and the market was not impressed, sending the stock back below $200 a share for the first time since May 2023. Tesla has fallen out of favour with traders since September last year when it became evident that higher interest rates were having a serious impact on vehicle sales.

This has resulted in big price cuts for Tesla cars, which naturally impacts margins and revenues, both of which missed analysts' estimates. However, the long-term story is still very much intact. I am of the firm opinion that the drop in demand has nothing to do with competition or a diminution in EV demand. This is a purely macro issue related to interest rates.

Most people finance their car purchases and higher rates means the cars become a lot more expensive. Tesla has such good margins that they have been able to cut prices, a luxury their competitors cannot afford. The cuts have kept sales ticking along, which in turn, has grown their user base. More Tesla cars on the road is a big positive for software sales down the line; think monthly subscriptions to self-driving software.

2023 was still a productive year for the company. They reached a 2 million vehicle annual production rate, the Model 3 was the best-selling car on the planet, and they made solid progress in their robotics, self-driving and next-gen vehicle divisions. The Cybertruck will ramp up production and deliveries this year.

No company is immune to macrocycles and internal challenges. These usually create good long-term buying opportunities. For clients with a higher risk appetite, we feel now is a good time to accumulate more Tesla shares.