Shares of Tesla ( TSLA ) ended the week down 4% on Friday as the EV maker missed Wall Street estimates for its third-quarter deliveries, issued a recall and discontinued a cheaper model.
The Elon Musk-led electric vehicle maker delivered 462,890 EVs during the three months ended September 30. While that was just a nose hair behind the 463,897 expected by Wall Street, disappointed investors sent Tesla shares down more than 3% after Wednesday’s report. The narrow miss marked the fourth consecutive quarter that Tesla fell short of analyst expectations.
The story continued on Thursday, when shares fell 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 ounce of dependence on Chinese-made auto parts amid 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 from China, Ives said. Just two years ago, about half of Tesla EVs used the cheaper LFP batteries.
In addition, Tesla has launched its fifth recall for its Cybertrucks this year. Tesla recalled more than 27,000 silver, spaceship-like electric pickups due to problems with their rearview cameras, which did not meet federal safety standards.
The tough week comes as Tesla has faced a number of high-profile issues over the past year – from safety concerns over its Autopilot feature and massive recalls to factory closures, layoffs and increased competition in China. Three senior Tesla executives resigned this spring, and Bloomerg reported Thursday that longtime Chief Information Officer Nagesh Saldi will also leave the company.
The stock rose 4% at market close on Friday after a strong jobs report in September boosted the market.
Tesla shares have been on a rollercoaster, plummeting after its dismal first-quarter earnings report in April and then rebounding in July when Tesla outperformed expectations in the subsequent earnings period thanks to price cuts.
Now 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 an optimistic note to investors Friday, Wedbush’s Ives said: “We believe Robotaxi Day is a [a] groundbreaking and historic day for Musk and Tesla and marks a new chapter of growth around the autonomous, FSD and AI future at Tesla.”
“We continue to believe Tesla is the most undervalued AI name on the market and we expect Musk & Co. will unveil a ‘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 price rising to $300 over the next 12 months, well above 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’s stock soaring.
“I think it’s hard to get excited about a stock at such a high level,” he said, noting that the launch will showcase Tesla’s big vision for AI and autonomous vehicles — a vision that he says will likely take some will take years before this becomes reality. “makes financial sense” for the EV maker.
Narayan believes Tesla’s rapidly growing energy storage business will be another big boon for the company, as will Tesla’s sales of EV credits which he says could generate “billions” next year.
JPMorgan (JPM) analysts have a more cautious view on Tesla, giving Tesla an Underperform rating. While Tesla’s third-quarter deliveries weren’t far below recent Wall Street forecasts, JPMorgan noted that deliveries were far from the numbers analysts had forecast a few years ago before tempering their expectations. In October 2022, JPMorgan said, analysts forecast Tesla would ship 651,000 electric vehicles — about 29% more than the company actually reported for that period.
And dreams of self-driving vehicles may face hurdles in mainstream adoption. Companies’ efforts to integrate autonomous taxis into urban traffic have so far failed. Waymo, owned by Alphabet (GOOG), was investigated by the federal government this spring after accidents and traffic violations, and in June the company recalled its fleet of nearly 700 self-driving cars. Last year, Cruise, owned by General Motors (GM), halted operations when a driverless taxi struck a pedestrian and dragged her twenty feet.
JPMorgan on Thursday lowered its full-year earnings per share forecast for Tesla from $0.64 to $0.60. The underperformance in the third quarter means Tesla could be heading into the first year ever of no growth in deliveries. They said that due to the ongoing discrepancy between Tesla’s fundamentals and stock market hype, missing out on deliveries in 2024 would be “another factor that would cause more investors to pay more attention to the growing gap between its fundamentals and its appreciation” rather than “any kind of “ah ha” moment” in which stocks plummet.
Laura Bratton is a reporter for Yahoo Finance.
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