Tesla, Inc. Stock: -3.40% at Close, Quarterly Results Disappoint on Margins
Tesla ended lower on Friday, October 24, with the stock down 3.40% to $433.72. This closing reflects the third quarter results released Thursday evening, marked by squeezed margins and a decline in net profit, despite revenue exceeding expectations. The U.S. market, however, ended in positive territory with the Nasdaq up 0.78%, highlighting the particular disappointment of investors towards the electric car maker.
Trading Volume and Market Reaction
A total of 94.7 million shares were traded, representing 3.02% of the company's capitalization. This sustained flow reflects investor interest in the stock during this critical release. Despite the heated day, Tesla's stock maintains a significantly positive annual performance with a 66.51% increase over the past twelve months, far outpacing the Nasdaq's 26.15% rise over the same period. However, over the past week, the stock has lost 1.27%, reflecting the turbulence related to Thursday's announcements. The contrast between long-term performance and recent decline highlights the volatility that characterizes this stock, particularly during earnings release periods. The intense trading volumes signal a rapid market repositioning following the disclosed figures.
Core of the Disappointment: Quarterly Net Profit
At the heart of the disappointment is the quarterly net profit. Excluding exceptional items and reported per share, it came to $0.50, down from $0.72 a year earlier, marking a significant decline. However, analysts had anticipated $0.56. Thus, Tesla did not meet market expectations on this crucial aspect. The CFO quantified the impact of tariffs at over $400 million for the third quarter alone, a major factor in the squeezing of results. Additionally, increased restructuring costs and higher expenditures on artificial intelligence and research and development contributed. Regulatory credits, another traditional source of margin, have contracted. In contrast, revenue jumped to $28.09 billion, up 12% year-over-year and surpassing the consensus of $26.54 billion. Global deliveries reached a record with 497,099 vehicles, representing a 7% annual growth. Tesla's paradox is thus evident: record sales but weakened margins, a balance that weighs on the already high valuation multiples of the group.
Valuation and Strategic Moves
Tesla remains valued at 364 times the expected earnings for 2025, a premium multiple far exceeding that of its tech peers. The stock has gained 9% since the start of the calendar year, although its performance remains below that of the Magnificent Seven. An investigation by the U.S. road safety agency into the 'Mad Max' driving assistance mode was also reported on October 24, adding a short-term regulatory risk. To support demand, Tesla has launched cheaper 'Standard' versions of its Model Y and Model 3, reducing prices by up to $5,500. This strategy reflects expectations of demand normalization in the coming quarters, particularly as U.S. tax incentives expire.
