Shares of Tesla (NASDAQ:) dropped by more than 7% in pre-market trading Thursday morning. The drop comes as Wall Street analysts raise doubts about the company’s capacity to sustain the exceptional growth that has distinguished the electric vehicle maker from other automakers.
CEO Elon Musk, who last year referred to Tesla as “recession-resilient”, expressed his concerns Wednesday about the potential effects of elevated interest rates on demand.
This unease follows the company’s significant revenue shortfall, which marked the largest miss in over three years, despite implementing substantial price reductions.
This shift in Musk’s stance, coming from one of the most prominent figures in the automotive industry, has intensified worries about the future prospects of the electric vehicle (EV) sector. As a result, it was expected that Tesla’s market capitalization, making it the most valuable automaker, would lose over $50 billion.
“Though there were a few bright spots in the quarter, the bottom line is that street estimates will need to come down again,” analysts at Citi wrote in a note.
“It didn’t have the same zip,” wrote analysts at Canaccord Genuity. “We await Tesla’s earnings calls with a sense of excitement and suspense — and they usually deliver. Not Wednesday night.”
Tesla is expected to cut prices further in order to achieve its annual delivery target of 1.8 million vehicles. This is despite the fact that the company’s gross margin contracted to 17.9% between July and September, down from 25.1% in the same period the previous year.
The ramp-up of the highly anticipated Cybertruck will also place pressure on the company’s profitability in the coming months, likely offsetting any boost from easing commodity prices.
Overall, 10 analysts cut their price targets on the stock, pushing the median view to $260, according to LSEG data.
As of this writing, Shares of TSLA are down 6.82% in pre-market trading Thursday morning.