Tesla's stock price is going to plummet? Analysts say both sales and profit margins will decline.
Analysts suggest that Tesla is engaging in a "profit margin disruption" by lowering prices, but sales in the third quarter are expected to decline MoM.
Despite Tesla's stock price soaring by 108% this year, some analysts believe that the stock price may further decline due to the lack of expected effects from the "profit margin disruption" caused by price reductions.
Why the bearish outlook?
Gordon Johnson, who is bearish on Tesla, has expressed his views on recent delivery data from China and Europe, and made a pessimistic prediction about Tesla's stock price.
In a report released on Tuesday, Johnson from GLJ Research stated that Tesla's stock could face significant selling pressure.
The analyst pointed out that since 2020, Tesla has implemented multiple price reductions in China and offered substantial discounts on inventory vehicles. Tesla is engaging in price reductions that disrupt profit margins, but sales in the third quarter are expected to decline compared to the previous quarter.
In the second quarter, Tesla sold 466,140 vehicles worldwide, with 247,217 vehicles manufactured in China (including domestic sales and exports).
Continued decline in profit margins
Johnson predicts that market expectations will be lowered due to the continuous price decline. The current general expectation is that although delivery volume is expected to decrease in the third quarter, gross margin will continue to rise.
Tesla has benefited from temporary shortages of automotive components, which have now passed. He added, "Profit margins are returning to the mean."
"Wall Street has not yet fully understood this dynamic... not yet."
The lackluster performance of Tesla's stock price since the release of the earnings report is attributed to the uncertain outlook for profit margins. To make matters worse, Musk stated that an environment of rising interest rates may require further price reductions.
In line with Musk's thinking, Tesla continues to significantly reduce prices in various regions in order to achieve its goal of delivering 1.8 million vehicles for the year, with 910,985 units expected to be delivered in the second half of the year.
