Tesla stock falls on year-over-year income, earnings drop

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Tesla CEO Elon Musk attends the official opening of the new Tesla electric car manufacturing plant on March 22, 2022 near Gruenheide, Germany. The new plant, officially called the Gigafactory Berlin-Brandenburg, is producing the Model Y as well as electric car batteries.

Christian Marquardt – Pool/Getty Images

Shares of electric vehicle manufacturer Tesla fell nearly 10% on Thursday, a day after the company reported a more than 20% drop in net income and EPS compared with the year-ago quarter.

Tesla reported net income of $2.51 billion for the first quarter of 2023, down 24% from the prior year, and GAAP earnings per share of 73 cents, down 23% from the year before. Tesla CEO Elon Musk also suggested that the company would prefer higher volumes to higher margins, a comment that prompted some concern from analysts.

“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here, versus a lower volume and higher margin,” Musk said on an earnings call. Tesla has cut U.S. prices six times since January, with the most recent reduction this Tuesday. Tesla has cut the price of its Model 3 by 11% this year. Prices of its Model Y have been lowered by 20%.

“We are cautious of the discounting given LT brand risk,” a note Thursday from Wells Fargo read, referring to longer-term damage to Tesla’s brand. Wells Fargo cut its price target for the company from $190 to $170.

Analysts from Oppenheimer wrote that while Tesla would benefit over time from the potential market share gains that price cuts could bring, “near-term margin pressure” would continue “to be a concern for investors.” Oppenheimer has a perform rating on Tesla’s stock.

Tesla shares remain elevated from a dismal 2022 performance which mirrored the broader downturn in tech companies. Shares of the electric vehicle manufacturer are up nearly 47% year to date as of Wednesday’s close.

Correction: Tesla reported GAAP earnings of 73 cents per share. An earlier version mischaracterized the result.

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